There are a lot of ways to game cap-and-trade.
For three years I've said don't let traders anywhere near such a scheme if the U.S. goes that route and don't let politicians anywhere near the money.
Our preference is "Cap-and-Tax (auction) with 100% Rebate, not Cap-and Trade.
I'm sure long-time readers have gotten tired of seeing these two quotes:
and:"I don't know if climate change is caused by burning coal or sun flares or what," said the Moscow-based carbon cowboy. "And I don't really give a shit. Russia is the most energy inefficient country around, and carbon is the most volatile market ever. There's a lot of opportunity to make money."-from The Bored Whore of Kyoto
The whole reason for the existence of traders is to make as much money as possible, consistent with what's legal...I lived through this: if you didn't manipulate the market and manipulation was accessible to you, that's when you were yelled at.
-New York Times, May 8, 2002
The entire five-year period of the European Union's emissions trading scheme (ETS) that ends in 2012 is set to deliver carbon savings of less than a third of 1% of total emissions, according to a new report.That£1.5 billion is a direct transfer from British housewives, trying to balance the family budget, to the world's largest steelmaker.
The analysis by emissions trading campaign group Sandbag predicts that only 32m tonnes of pollution permits will need to be surrendered to meet the cap on greenhouse gas emissions – a tiny fraction of the 1.9bn tonnes of carbon emissions covered by the ETS each year. The "miniscule" saving is the result of the economic crisis having driven down industrial activity while the caps remain at the same level.
"The ETS is the best thing we have but it is being held back by industry lobbying," said Sandbag's founder, Bryony Worthington. "We think the European commission wants to lower the caps but they need to win the political battle. As it stands, no one needs to do anything to curb their emissions until about 2016 – the ETS is locking Europe into a carbon trap rather than a carbon cap."
The report also finds that the number of "hot air" permits held by steel and cement manufacturers has risen sharply. These permits were awarded in anticipation of high levels of production, but since the recession has caused production to crash, the companies no longer need the permits. They can sell them on the open market or hoard them until the next ETS phase, when the carbon price may have risen. In 2009, the top 10 holders of surplus permits had 119m – four times the number of the previous year.
In Sandbag's projections, which assume an economic recovery and a return to 2008 levels of emissions in 2011, the biggest holder of hot air, steel-maker ArcelorMittal, will have amassed over 100m permits, worth over £1.5bn at today's price. The next three biggest in the list, Lafarge, Corus and Cemex, are predicted to have over 78m surplus permits between them by 2012....MORE
Enron on Cap-and-Trade
Here's one of our Cap'n Trade posts that used the quotes above:
Climateer Investing on Carbon Trading and Traders
The post immediately below, "Richard Sandor, Barack Obama and the Founding of the Chicago Climate Exchange (CLE.L)" got me to thinking about the carbon markets.
Proponents repeat the mantra that cap-and-trade is a "market based 'solution'".
This is, of course, nonsense.We have so many more that, rather than link to them I'll direct you to the search blog box keywords cap-and-trade or carbon trading.
Just as an economist using the tools of science (mathematics) doesn't make economics a science, carbon traders using the tools of markets doesn't make carbon trading market based.
The carbon markets are an entirely artificial construct, beholden to political paymasters for their very existence. Which may be why so many political types are planning to profit from them.
Directly, think Al Gore's Generation Investment Management's investment in carbon project developer Camco or Lord Nicholas Stern's Vice-Chairmanship of IDEACarbon's parent IDEAGlobal or indirectly as a source of campaign contributions for pols still in office, or an unaccountable slush fund in the case of the U.N.
The word artificial led me to think of it's cousin, artifice. Here's the Oxford Pocket definition:
ar·ti·ficen. clever or cunning devices or expedients, esp. as used to trick or deceive others: artifice and outright fakery.The securities attorneys among our readers will recognize the word from the common state security law usage "...employ any device, scheme, or artifice to defraud".
Here's the view from Russia, quoted in The Bored Whore of Kyoto:
"I don't know if climate change is caused by burning coal or sun flares or what," said the Moscow-based carbon cowboy. "And I don't really give a shit. Russia is the most energy inefficient country around, and carbon is the most volatile market ever. There's a lot of opportunity to make money."Here's a former Goldman Sachs trader:
The whole reason for the existence of traders is to make as much money as possible, consistent with what's legal...I lived through this: if you didn't manipulate the market and manipulation was accessible to you, that's when you were yelled at.Here's Lord Stern at the Bali Climate Conference where the largest NGO contingent were the gang from the International Emissions Trading Association, 336 representatives including lawyers, financiers, emissions traders, consultants, certifiers and emissions trading experts... the IETA made up 7.5% of the 4483 Non-Governmental Organisation (NGO) delegates registered for the U.N. shindig:
-Former Goldman Sachs trader
New York Times, May 8, 2002
“Bali will set in motion a process that will define the structure
of the carbon markets for decades to come”
“By 2020 the global carbon market could be worth EUR 240-
-Sir Nicholas Stern
"This (climate change) is much too important to leave to environment ministers"
-Sir Nicholas Stern
to Finance Ministers basking in Bali
I'm with David Sokol (Chair, Berkshire Hathaway's MidAmerican Energy Holdings subsidiary) regarding the trade part of cap-and-trade:
Berkshire Hathaway's MidAmerican Energy on Waxman-Markey: "We Don't Much Care For It" (BRK.A)