If the carbon trading business seems too good to be true, maybe there’s a good reason
Guest post by Kelvin Kemm
The COP-18 environmental conference held in Doha has come and gone. In the wake of high expectations for a successor treaty, the Kyoto Protocol was extended, but only after bitter debate – and several countries have withdrawn from the process or signaled their intent to do so.
Moreover, many observers believe the decision to extend the Protocol was primarily the result of countries not having the courage to stop or scuttle it outright, and not actually knowing what to do next. So the easy way out was to just extend Kyoto and also promise the developing world lots and lots of dollars for “climate mitigation,” which is a sort of apology from the first world for having allegedly messed up the planet in the first place with their fossil fuels and economic development.
Whether the billions of promised aid dollars will really materialize is another matter. But a lot of people have already gotten rich – including Al Gore, hundreds of climate scientists, and thousands of environmental activists and government bureaucrats – and others are trying to cash in.
I recently read an article in a South African magazine concerning carbon trading. Headlined “The Big C is a Money Tree,” the article included a picture of a tree with hundreds of dollar bills hanging on the branches. Its essence was that people can easily make loads of money in the carbon trading business. Unfortunately, much of the sentiment was correct. So alarm bells should be ringing.
When it appears easy to make a lot of money from something simple, then in all probability something is wrong. The economic rules which govern the world usually dictate that it is not easy to make a lot of money with not much effort.
Consider the hamburger market. If it is easy to sell a large number of hamburgers and make a lot of money, then what happens is a competitor joins the market, then another, and another. The result is that the quality of the hamburgers goes up and the price comes down. This is all because the natural competition forces the sellers to offer the best quality at the lowest price.
If one of the hamburger sellers can’t make the grade, he goes out of business. None of the hamburger sellers really wants to be kind and sympathetic to the consumers, but they have no option but to be attentive to their customers or the customers just go to a competitor. Hamburger suppliers have to offer a good product at a good price to stay in business. So the basis of the hamburger business is good cooking, good service and efficient meal production.
So one can ask the question: What is the basis of the carbon trading business? It is buying or renting air with less carbon dioxide (CO2) – based on assertions that CO2 causes global warming, climate change, and more frequent and intense storms, droughts and floods. Sounds dicey, doesn’t it?
What happens is that if some company, say in Germany, wants to extend its factory, and they are going to have to produce carbon dioxide gas (CO2) in the operation of the plant, they may find that they will exceed their CO2 emission quota.
If a company in Germany wants to expand its factory, and operating this larger facility will produce carbon dioxide, the new operation may exceed the company’s CO2 emission quota. One way out of this predicament is to come to a country like South Africa and find some land where workers can grow plants that take CO2 out of the air. Another is to find a factory that emits CO2 and help it buy and install technology that removes some tons of CO2 from the factory’s emission.
(There is a type of South African cactus called Spekboom, which translates as “bacon tree.” The connection between cactus and bacon is not clear. It’s easy to plant. You just break off a soft branch, push it into the ground, and it grows – normally to about a meter tall, but sometimes to 3m over many years. Spekboom grows in arid areas like weeds and is generally useless. But it apparently absorbs much more CO2 than normal plants. So Europeans pay South Africans tidy sums to plant fields of the stuff. The Europeans then claim “carbon credits” and feel righteous, while South Africans get rich watching weeds grow.)
Each time one of these operations removes 10 tons of CO2 from South African airspace, the German company can put the same amount of CO2 into Germany’s air and (presto!) all is great again, because on balance the total CO2 emitted into whole world’s atmosphere is equalized.
Then the German company pays the South African company a lot of dollars per month to keep South Africa’s air “clean,” so that the German company can put the “saved” CO2 back into Germany’s air.
So the basis of the carbon trading business is to rent “clean” air from somebody else.
Therefore if you launch a major project to develop a new factory, and a significant part of the budget is carbon trading income, then don’t forget that renting clean air is part of the asset of the business.
If the Kyoto Protocol collapses and the clean air requirement falls away – then your investment blows away in a breeze … of “clean” air. That would be disastrous for you. And that is a primary reason why so many people are determined to perpetuate Kyoto in some form or another.
Many people would never build their new factory on a foundation of sand. But they are happy to build it on a foundation of air. I say: “Be careful.”
If it turns out that man-made industrial CO2 is not leading to climate change then the whole carbon market could disappear faster than a puff of wind.
Remember that the measured increase in the earth’s atmospheric CO2 concentration over the last century does not match global temperature increase very well; in fact, a good correlation is distinctly absent. Furthermore, a competing theory argues that the sun’s magnetic influence on incoming cosmic radiation seems to match the observed temperature profile of the planet a lot better; this theory relates to varying cloud cover, influenced by the varying amount of incoming cosmic radiation.
The carbon trading business seems too good to be true. Money trees are not common. Warning bells should be ringing.
___________
Dr. Kelvin Kemm is a nuclear physicist and business strategy consultant in Pretoria, South Africa. He is a member of the International Board of Advisors of the Committee For A Constructive Tomorrow (CFACT), based in Washington, DC (www.CFACT.org) and received the prestigious Lifetime Achievers Award of the National Science and Technology Forum of South Africa.
There is an easier way to do this. Plant trees, cut them down, turn them into paper. Make phone books, when finished, discard them. Pulp the phone books into a slurry, pack the slurry into old played out mines. Pack them plum full and pack them tight like “rammed earth” to fill up the entire mine.
Carbon neutral coal.
Or use the slurry to backfill strip mined areas, maybe add a little cement so it sets up hard.
What happens when these trees eventually die? Do they need buy carbon credits before they’re allowed to die and rot or whatever?
Only European countries have continued with Kyoto – and that was a result of an internal negotiation two years ago, which resulted in the emissions commitment being trivial. All are members of the EU ETS.
The sole non-European is Australia. Currently paying carbon tax at about 7 times the international carbon price, the Gillard administration really had no way of getting off the hook except by agreeing to join the EU ETS in 2015 (if it survives this year’s election).
So Kyoto is no more than an extension of the European club.
The ABC in Australia is still spreading the carbon trading money tree fraud coming out of the meeting in Tasmania .A lot of strokes and heart attacks are caused by global warming please read = http://www.abc.net.au/news/specials/climate-change/
“Warning bells should be ringing.”
$$$$$$$$$$$$$$$$$$$$
“A major City of London Police operation in the Square Mile and across the South East has seen the force dismantle a suspected criminal operation believed to have been selling worthless carbon credits to investors living across the UK…..detectives arrested eight men working out of two City offices after finding evidence linking them to fraudulent companies Hudson Forbes, CT Carbon and Burlington Energy Markets.
“DI Matthew Bradford, of City of London Police, said:
Carbon credits are the latest in a growing list of products marketed by fraudsters as a sure fire way to make maximum profits with minimal risks. They exploit people’s misguided belief that environmental investments cannot fail, and then use teams of cold callers to seal the deals, often bullying victims into handing over their savings against their better judgement.”
http://www.cityoflondon.police.uk/CityPolice/Media/News/detectivesdismantlesuspectedcarboncreditfraud.htm
Spekboom (Portulacaria afra) is a succulent commonly known here in California as elephant’s food or dwarf jade plant. Being a staple offering in the nursery trade, perhaps somebody with an enterprising bent can exploit it in our state’s budding carbon economy, and bring home lots of bacon.
Carbon Trading is like the snake-oil salesmen back in the 19th century. These skilled salesmen promised incredible benefits of their magic elixirs, however, once the townspeople realized their terrible tasting bathtub gin not only didn’t cure their gout or hemorrhoids, but also gave them a badhangover, they’d tar and feather the charlatans and run them out of town.
The media, schools and government elites have been skillful barkers for the IPCC snake-oil scoundrels. What’s even more amazing is that they’ve been able convinced the townspeople to buy their quackery for an illness they don’t even HAVE! Figure that one out….
This deceit is quickly approaching a denouement as we enter the 17th year of no warming, while CO2 emissions are grow at 3% annually…
My only hope is that the townspeople will learn a valuable lesson and become more skeptical of governments’ claims and the often nefarious agendas that lie behind them….
More likely, P.T Barnum’s maxim will be proven true, “There’s a sucker born every minute….”
And so it goes….until it doesn’t.
Well said. Let’s hope the “puff of wind” is not too far away.
The alternative to playing the Carbon credit game, is to simply move your production facilities to a country not signed up to Kyoto. Given the global and competitive nature of business, that’s what’ll happen …
Pointman
I like to think of it as “paying a poor person to freeze in the dark for you”…
Good article. To me the main problem with the whole carbon trading market, is that it is not a market at all – rather the supply is essentially limitless as one is just trading ‘carbon loans’ with 0% interest. We all know what happened to the junk loan market…
Also the other warning indicator that it is not a true market is that government’s are only two happy to supply ‘multipliers’ to carbon credits/etc – so further eroding any value the original ‘credit’ actually had. Australia had a 3 for 1 deal on credits with solar panels not all that long ago…
Amusing you should mention hamburger quality, considering what the UK has just experienced with horsemeat being found in 100% beefburgers.
Antony that is brilliant! I am going to sell solar magnetic field credits to Green companies. All they then have to do is to lock their fields away in a metal box to keep the planet cool. Wow! And then there is the follow-on solar-magnetic field box business!
I just need some venture capital. Anyone seen Al Gore?
Once upon a time [1720 to be precise] there was a market crash – The South Sea Bubble –
Parallels to CAGW
1. seen to be a cant loose safe investment, rational caution was abandoned.
2. no one questioned the credentials of the perpetrators of the scheme.
3. no one examined the business plan or the business practices of the South Sea Company.
4. absurd ideas were treated as viable business plans.
Sound familiar!!!
It is a good survey of the Emperors’ market in New Clothes.
What Emperor will admit to being scammed by the clever marketeer? Worse, the business community has discovered this in the subscription for access business model. The NRA Emperor has no clothes, for example, and charges stiff subscription rates for attendants to carry his train. Will they admit to being gulled?
Editorial note: Repetition of the phrase What happens is that if some company, say in Germany, wants to extend its factory, and they are going to have to produce carbon dioxide gas (CO2) in the operation of the plant, they may find that they will exceed their CO2 emission quota.
Only two words to describe it … PONZI SCHEME
Another mad idea popped up again in Australia this week. I first heard about it a couple of years ago but thought that it was a hoax. No, it is real.
There is a plan afoot to go out and shoot thousands of camels in the outback. As non-native animals they are deemed expendable (not like us humans) and since they emit some amount of GHG each year they are planet killers.
So Australia will gain carbon credits by flying helicopter gunships around and shooting placid grazing animals as they go about doing what they have been doing for about ten generations.
Next year I expect we will be lobbing virgins into volcanoes.
Of course the carbon trading market is a boodoggle: sellers of credits (farmers & forresters) are producing their carbon sinks at maximum capacity right now, whether or not someone is willing to buy the credits. So how does buying the credit make the air any “cleaner?”
Reminds of an article in “Freakonomics”. It was entitled “Why do most Cocaine Dealers live with their mothers?” – same reason a few get rich most get shafted with the dream of getting rich. PONZI strikes again.
My favourite parallel is the salesman who manages to talk his way into your house – and starts spraying an aerosol around..
‘What are you doing..?’ – you ask, quite rightly..
‘Its anti-elephant spray..’
‘But there aren’t any elephants..’
‘YOU SEE..?? It works..!’
Even more nefarious if the company with the ‘carbon problem’ can end up being paid by european taxpayers to close a business. Tarring & feathering is too good for carbon traders.
http://www.dailymail.co.uk/news/article-1235200/Steel-firm-Corus-90m-pollution-payoff-closing-plant-axing-1-700-jobs.html
Another excellently written article – clear, concise and easy enough for ordinary people to understand. A point made well. The first time I can recall anyone has actually attempted to explain the mysteries (and the folly) of ‘carbon trading’ to me in honest, plain English. Thank you!
TheBigYinJames says:
January 17, 2013 at 2:29 am
You think the US is any better? Think twice about that. BTW horse in “meat” in the EU zone is not unusual.
mfo says: @ January 17, 2013 at 12:53 am
“A major City of London Police operation in the Square Mile….
>>>>>>>>>>>>>>>>>>>>>>>>
Sounds like the Banksters don’t want another gang muscling in on their fraud.
TheBigYinJames says:
January 17, 2013 at 2:29 am
Amusing you should mention hamburger quality, considering what the UK has just experienced with horsemeat being found in 100% beefburgers.
>>>>>>>>>>>>>>>>>>>>>>>
Given horses don’t get Mad Cow Disease and it is better for you, I wouldn’t complain.
HMMMmmm, I think I will show this study to the blockhead I have out in the stable…..
Doug Huffman says:
January 17, 2013 at 2:53 am
….. The NRA Emperor has no clothes, for example, and charges stiff subscription rates for attendants to carry his train. Will they admit to being gulled?
>>>>>>>>>>>>>>>>>>>>>>>>>>>
You missed the lessons of history. The big guys KNOW it is a hoax and they and their friends will leave the market just ahead of the crash while the chumps and fools are left holding the worthless pieces of paper they sunk their saving into. It is the periodic ‘sheering of the sheep’ typical of Bubbles Al Gore was the Bell Wether for the smart investor. Obama got an extension of one year for ‘green energy’ so his buddies have time to exit. Food looks like the next bubble being lined up.
This carbon trading is nothing but banditry. It’s a hambush.
(Ouch)
There is an easier way to do this. Plant trees, cut them down, turn them into paper. Make phone books, when finished, discard them. Pulp the phone books into a slurry, pack the slurry into old played out mines. Pack them plum full and pack them tight like “rammed earth” to fill up the entire mine.
No, no, no. This is horribly inefficient, as phone books are not pure carbon, they’ve got lots of hydrogen and other stuff (cellulose is a carbohydrate). Pack the wood into a kiln. Heat the kiln with a large solar mirror to 1000C or so. All of the volatiles — mostly hydrocarbons — in the wood are given off, and can in fact be burned as fuel producing more water than carbon dioxide. What is left is pure carbon — charcoal. Compress and pack that back into the mines.
If the “CO_2 is disastrously bad” hypothesis turns out to be correct, this simply runs the coal mines backwards an in a century or four they’re full again and the world can return to catastrophic glaciation as it normally would. If the hypothesis turns out to be false (if, for example, glaciation starts up again in spite of CO_2 once we control black soot a little bit better than we do now, or as the next Maunder minimum begins) then we have a bit more coal to burn.
Economically this is silly, of course — we’d be better off just burning the wood instead of coal to make energy straight up and leave the coal we would have burned otherwise in the ground. But then, we’d be economically better off still burning Thorium or even Uranium instead of coal in the first place.
Any decade now. In the meantime, carbon trading in general is a scam that benefits carefully selected individuals and persists only because human beings suck at doing arithmetic, making them, er, suckers for con artists who can.
rgb
Reblogged this on This Got My Attention and commented:
Carbon trading is an incredible money tree for the cronies and friends of government and politicians. Look for the corruption. It’s usually just below the surface.
Except in this money-tree, too good to be true ponzi scheme, the bureaucrats, who’s positions exist for the purpose of preventing this kind of scam, are the scammers.
This scam is unique in that it is a fraud perpetuated by intergovernmental connivance.
The level of corruption herein, is an open attack on civilization, by the people we pay to maintain that illusion.
Your opinion of your government will never be higher than it is today.
Doubt that statement? Follow the money.
When one looks at the havoc wrought by speculation in trading asset backed commercial paper, in other words mortgages with actual physical buildings associated with them, consider the possibilities of fraudulence involving speculation in something that doesn’t even involve an asset.
A carbon credit is so aetherial that it will fill a balloon easily, and reap huge rewards for a handful of insiders when the balloon pops and leaves millions of innocents holding the bag of hot air.
So why can’t I get a good hamburger in my town? Everything about economics is hyphothetical and none of it works in real life. The theoretical ideas of a “discipline” that has never predicted or solved a single major economic problem are only useful for solving fictitious problems like AGW. The two were made for each other and by applying economics to AGW, the true objective of economics is realized, the rich get richer. Never trust a discipline that buys its own “Nobel” prize to give it legitimacy. (But I still agree with most of what Ross McKitrick has to say.)
The fact that carbon credits are traded on Wall St tells you exactly who is behind this scam.
Here is a chance to hear non other than Maurice Strong and Edmund de Rothschild starting the whole scam…notice some banker from Montreal calls us “cannon fodder, that unfortunately populates the Earth right now” – like Kisinger called us “useless eaters”
Crosspatch,
“There is an easier way to do this. Plant trees, cut them down, turn them into paper. Make phone books, when finished, discard them. Pulp the phone books into a slurry, pack the slurry into old played out mines. Pack them plum full and pack them tight like “rammed earth” to fill up the entire mine.”
Why waste the energy to turn it into a slurry? Shaft mines are damp hot places. Just shred them and blow the shreadded paper into the mine until if fills up. Compress as needed. The mine will do the converstion to slurry for you.
Then the German company pays the South African company a lot of dollars per month to keep South Africa’s air “clean,” so that the German company can put the “saved” CO2 back into Germany’s air.
So the basis of the carbon trading business is to rent “clean” air from somebody else.
I disagree with this. The “basis” in my view is that it’s a way to redistribute wealth from the North to the South. This has been a long-term goal of the UN and it appears they found a way.
Of course, to make things a lot simpler, the German company could just build its new factory somewhere other than Germany where the whole CO2 scam doesn’t apply and the cost of energy is cheaper. Which is what they are now doing and they wonder why EU unemployment is increasing. The aluminium smelting industry has left the UK due to high energy costs to create tax-funded jobs in the renewables industry. 1 green job destroys 3.7 real jobs.
Lew Skannen –
don’t know why my response to LewSkannen went thru with none of the following:
16 Jan: Bloomberg/Businessweek: Camel-Slaughter Plan Rejected for Australian Carbon Credits
A plan to give carbon credits for slaughtering camels, curbing emissions coming from their flatulence, was rejected by an Australian government committee.
The proposal by Northwest Carbon Pty, a land and animal management consultant, didn’t provide clear instructions for protecting animal welfare, and the method for assessing emission reductions was incomplete, according to a report by the Domestic Offsets Integrity Committee published yesterday on the Department of Climate Change and Energy Efficiency’s website…
“This decision by the DOIC simply serves to highlight the significant challenges faced by private proponents attempting to develop any genuinely innovative new methodologies under the CFI,” Tim Moore, managing director at Northwest Carbon, said in the e-mail. “We expect to submit a new, revised methodology in the second quarter of this year, having dealt with all the specific issues the DOIC raised,” he said…
http://www.businessweek.com/news/2013-01-16/australian-panel-rejects-plan-to-kill-camels-for-carbon-credits
good news:
Sluggish German economy forces EU carbon to record low
LONDON, Jan 17 (Reuters Point Carbon) – EU carbon prices hit a fresh record low on Thursday as poor economic data from Germany and relatively healthy supply of coal continued to force European power and coal prices lower…
http://www.pointcarbon.com/news/1.2142679
California downplays possibility of Australia CO2 market link
DAVIS, CALIFORNIA, Jan 16 (Reuters Point Carbon) – California officials said they have no plans to sign any agreement with Australia linking their carbon markets down the road, despite interest on the part of Australian officials to expand its coming emissions trading system…
http://www.pointcarbon.com/news/1.2141217?&ref=searchlist
GMO Spekboom! Cross it with Kudzu. Don’t worry about some environmental disaster from overgrowing a monoculture, cash is at stake! (I can’t remember how to embed the “cents sign” – C-slash). Carbon is the new currency, but has negative value. Forget the gold standard, we have an inverse carbon standard. Replace paper and plastic currency with bricks of charcoal! Take carbon out of circulation by putting it into circulation.
Sounds to me like the buying and selling of indulgences to pardon our sins.
Steinar Midtskogen says:
January 17, 2013 at 12:30 am
What happens when these trees eventually die? Do they need buy carbon credits before they’re allowed to die and rot or whatever?
-oOo-
OMG Steinar, does that mean I’m not allowed to die and be cremated without a CO2 emission permit?
“If one of the hamburger sellers can’t make the grade, he goes out of business. None of the hamburger sellers really wants to be kind and sympathetic to the consumers, but they have no option but to be attentive to their customers or the customers just go to a competitor. ”
####
This is just Marxist nonsense. You ought to be ashamed of yourself. It is demeaning and dehumanizing, which is exactly why Socialists have been pushing this view of business for over 100 years.
The carbon trading money tree.
It reminds me of this.
http://www.thetulipomania.com/
In both cases there was no actual value involved yet personal are economies were ruined.
TYPO!
In both cases there was no actual value involved yet personal economies were ruined.
One theme posited here is wrong: the bubble does not have to ever burst. If all nations devote some portion of gdp as a tax, and there springs up a green economy, the economy could sustain it indefinitely.
We have a lot of these situations: we are basically taxed to maintain things that supposedly return good, but you can scarce find evidence of this.
Museums are an example. A museum “enhances the community.”
Some do bring in enough tourist dollars to cover the expense. Some don’t. But you have to have them because the next city has them.
Economically, this is a modest drain on the economy – the money could have gone to an effor tthat would generate more wealth.
The bubble bursting is the Cloward-Piven strategy – we can sustain a great deal of unproductive expense, but at some point, we have so many museums we cannot sustain the economy of the community / not everyone can be employed as a panhandler or a PhD salary level docent. Somewhere, wealth has to be made, and those not generating wealth are detracting, and at some point the economy collapses. Like Greece.
But that happens with the portion of unproductive investment in the economy overall – not one market. If enough countries sign up. this market could survive for decades.
Dr., it is notable that absent desperate intervention by governments, the trend of carbon markets is to drive the price to $0, as happened with the CCX. Somehow, the market intuits that they are worthless.
Or, more intriguingly yet, the markets may know that adding CO2 improves ag yields, and is therefore valuable, and are trying to invert the price schedule. If only they were truly left alone!