UPDATE: related story shows what can happen when emissions trading doesn’t have proper checks and balances – Carbon trading tempts firms to make greenhouse gas
California hasn’t learned from the failure of the Chicago Climate Exchange this year, when a ton of Carbon traded for a mere 5 cents. Nobody wanted to buy it even at that ridiculously low price. But, like a zombie, carbon trading rises again in brain dead broken California.
Now the the AB32 madness begins, and PCarbX (which sounds like some over the counter antacid remedy) is the new trading scheme. I give it two years, max. Here’s the story from the San Francisco Chronicle.
California poised to enter carbon-trading market
Andrew S. Ross
Today could be seen as the biggest day yet for California’s climate change law, assuming, as expected, the state Air Resources Board signs off on the rules to implement it.
It will also be a big day for Aaron Singer, CEO of San Francisco startup Pacific Carbon Exchange, (at left) which is engaging in an enterprise thought dead in the water not so long ago: carbon trading.
“It’s the official starting gun for California and for Western regional carbon markets,” Singer said. “It means we get to make this business a growing reality.”
Central to the law, which goes into effect in 2012, is a “cap and trade” system designed to limit the amount of carbon from the state’s 500 largest emitters – mostly power plants, energy companies and heavy industry.
Companies emitting less than their state-mandated limit can trade their unused allowance – also known as carbon credits, or offsets – with companies that may be seeking to emit more than their mandated share.
“This is a significant milestone,” said Josh Margolis, CEO of Cantor CO2e, a San Francisco offshoot of New York’s Cantor Fitzgerald, referring to the board’s expected action. “In the trading world, it’s been a decadelong anticipation.”
With the Bay Area Council serving as the firm’s incubator, Singer has been working on its trading infrastructure for the past two years and is in the process of obtaining the certifications and accreditations from the U.S. Commodity and Futures Exchange Commission.
In the meantime, PCarbX, as it is known, plans to begin some futures and options trading next year, pending a full rollout when the bell officially rings in January 2012.
In September, it also signed a memorandum of understanding with the Shanghai Environment and Energy Exchange to explore the establishment of more carbon markets in the United States and China.
Other entrants: PCarbX is not alone. In addition to Cantor CO2e, others in the “environmental commodity” business who are reported to be coming to California include the global Intercontinental Exchange and the Green Exchange, both with U.S. headquarters in New York. “We expect healthy competition,” Singer said.
“As a San Francisco-based entity with ties to policymakers, they’re in a unique position,” said Adam Raphaely, director of environmental markets at Karbone, an environmental commodity brokerage and project finance company in New York. “We see a potential relationship there.”
Neither is California alone, even though Congress and the Obama administration gave up on a national cap-and-trade policy this year.
The Western Climate Initiative, a cap-and-trade program, which includes several Western states and Canadian provinces, is due to go into effect – also in 2012.
Still, for all the anticipation, carbon trading here is likely to start small, especially as the Air Resources Board is initially giving emission allowances away for free, rather than the $10 minimum per ton the agency had proposed in its rules. And companies don’t necessarily have to trade through exchanges.
“You won’t see a big bang, but, rather, a buildup in intensity,” said Margolis, who has estimated the market could be worth anywhere from $3 billion to $58 billion by 2020 – the target year for California’s emissions to be lowered.
“This is much more than simply a business opportunity,” Singer said. “We’re here to serve the aims of AB32 and help the next generation of clean tech investment for our state.”
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/12/15/BUO21GQG0D.DTL#ixzz18L4gAqtW
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emmaliza says:
December 17, 2010 at 6:36 am
“Californians will probably meet their carbon targets before 2020. They will teach us all how to live without electricity”
It won’t be that bad. You will just have to learn to make do with electricity produced when the wind blows and pay for the transmission losses from Washington and Oregon.
You’ll probably have to give up that TV with the DVR recorder in favor of a battery powered laptop and a internet subscription to netflix as the wind is never going to blow when your favorite TV show is being broadcast.
The smart grid will still allow your air conditioner to run 3 months a year, December,January and February just like the folks in Australia.
Is this a better business than sewing machines? 🙂
there is no stopping determined thieves
look how many tries it took them to get a central bank up and running
EPA’s strategy is to go after major GHG emitters, armed with their Supreme Court ruling (Massechusetts et. al. v EPA, 2007) and subsequent endangerment finding.
http://www.pewclimate.org/epavsma.cfm
Not to be a downer, but the US EPA is totally invested into GHG mitigation. I’ve been in many discussions with the right folks and see how this is going, up front & personal.
No trade, just cap via regulation, similar to how water pollution is regulated from sewage treatment plants under the NPDES permit system of the Clean Water Act. It’s an old model at the EPA – regulate first & let the industry figure it out with their own resources. Worked for CWA, RCRA etc. so they are giving it a shot with GHG.
GOP makes noise about using the Congressional Review Act to counter this, but all the cards are falling the EPA’s direction…further pressure is coming from the threat of public nuisance lawsuits:
http://blogs.discovermagazine.com/80beats/2010/12/07/supreme-court-to-decide-is-global-warming-a-public-nuisance/
Sounds great to me. My kids and grandkids will rejoice in any uplift in the Arizona real estate market.
Don’t forget that Consultants are the Rats that swim towards a sinking ship
So we Californians will all live like the Amish: oil lamps, kerosene heat and light, Percherons doing the plowing, etc. Can’t you just see I-5 and 808 with rush hour horse drawn wagons? Wonder if the Caltrans horse poop clean-up buggies will be horse drawn as well.
Yes and no. States, as well as other more local municipalities, regularly issue municipal bonds, which is essentially what the Federal Reserve does when it “prints money.”
Mark
D Caldwell says:
December 17, 2010 at 9:59 am
Let’s hope they [Californians] come to their senses before they completely self-destruct.
Nah, imo, since they haven’t, they won’t – apparently it’s just too much fun. For the Narcissistically infantile adults among us, destroying things is fun, and even thrilling. It’s a bona fide “high”. And if you’ve also conveniently set yourself up as a “Progressive” hater of “Capitalism” and “America”, destroying whatever it has produced then becomes a
Marxistmoral obligation. So unless there are Teapartiers in California who will stay and fight, Californians won’t wake up until it’s too late, or until the rest of us are too looted, if we allow it.California has been terminated.
“Central to the law, which goes into effect in 2012, is a “cap and trade” system designed to limit the amount of carbon from the state’s 500 largest emitters – mostly power plants, energy companies and heavy industry.”
So California plans to import all their electricity and gasoline from other states and countries where it will not be subject to the cap-and-trade policy, and has to produce more CO2 after factoring in losses and transport. Typical political-environmental idiocy.
Well, the Birkenstock/sock combo wearing, Mac using, Starbucks drinking, recyclable scrubbing and sorting types have to have yet another thing to feel good about right?
What I find face palm amazing is that this has already proven to be a non-starter in more than one market – does the great Socialist State of California have knowledge that no one else has?
When the roof falls in on the world’s financial system, these dreamy schemes will be suspended pronto, “for the duration.”
anopheles says at 9:13 am:
“States in the US can’t print their own money. Putting them or their agents in charge of issuing CO2 credits is to give them the ability to magic money from the air. It is inflationary, in a way which will be beyond the control of the Fed.”
anopheles, you have hit the nail on the head.
What you say above is the entire impetus for the relentless push to cap and trade. “Magic money.”
I call it “monetizing the air.”
And Al Gore and his 18 partners ex-Goldman (see Generation Investments LLP) are exactly the kinds of sleazy sleazeballs who will benefit from this scheme, which is entirely and 100 percent at the expense of everyone else, e.g., the everyday taxpayer.
Carbon credits are literally fungible, tradeable, valuable monetary instruments aka “money.”
That’s why pols and financial parasites are so excited (and relentless) about cap and trade. They get to create and then grab free money under the risible guise of “climate change.” Criminals too, as we have seen repeatedly in the EU and very recently in China.
What a scam!
So izzat picture a picture of article author Andrew S. Ross; or izzat the carbon scam artist ”
I followed the links; nowhere to post a comment. I don’t waste any time on sites that don’t have an open comment line; screw them.
Not sure if anyone knows the details of this here, but can anyone clarify the following statement for me:
“Companies emitting less than their state-mandated limit can trade their unused allowance – also known as carbon credits, or offsets – with companies that may be seeking to emit more than their mandated share.”
Say Company X has 100 carbon units ‘share’, and Company Y has 100 carbon units ‘share’. Company X shuts down production, and thus uses 0 units – can they can sell this to Company Y for a profit without producing anything, while Company Y which increases production has to pay Company X for their unused credits?
Isn’t this a massive disincentive to expand production and an incentive to decrease production? It seems daft vs a state fixed tax per unit of CO2.
It seems to me that this is simply an unConstitutional State Money Counterfeiting scheme. These “Carbon credits”, which could just as easily be called C-bills for California Bills; aka State printed money; are simply created out of thin air in any amount the State wants to, and then sold as if they actually are something having a face value; as in CASH, and they can actually be sold or traded to others for something else of value; like protection money to prevent the Califonia CARB hoods from raiding your joint and shutting you down.
Because that what they will do if you refuse to pay their mordida.
I think that there’s a much better market for a speed exchange.
It works on the same basis. People are allowed to drive as fast as the speed limit. So when they don’t want to go that fast, they can trade that difference, selling to those who want to go faster than the speed limit.
It’s really sad to see California deteriorate so badly over the years I have lived there. All I can say is that overall, the majority of people in California are really kept in the dark and have no clue of the Bozos we keep putting into office.
AB32 is an example of “feel good laws”, the people who wrote it feel good about it, but in reality, energy costs will go up, businesses will leave, and unemployment will go up. This past November we did have a chance to delay the impact of AB32, BUT radical Environmental Groups spent millions of dollars in advertising telling the voters that AB32 will “AB32 will create almost 2 million jobs”.
However, the “2 million jobs” are nothing more than fantasy jobs and the study that promotes that view makes MAJOR assumptions. What if the assumptions made are wrong?
Will we be able to sue the Sierra Club and WWF for false advertising, if the jobs don’t happen?
Lametardic………….! Perfect!
Good One, Anthony! Along with Ipecac… a concise, brilliant new dictionary is truly coming into being…!
Your Friend,
Thorpie
If I were to buy a ton of carbon on the exchange for a nickel, do you suppose they’d send me a fancy certificate that I could frame and post in my powder room as a monument to climate irrationality?
I suppose that I’d receive an invoice of some sort, and that I’d be free to manipulate it in whatever fashion I wished, to memorialize the insanity…
It seems that as the Carbon Exchanges start up, burst with activity then have their founders cut and run while they collapse and leave the later investors holding the bag, they are following the tried and true methods of: The Pyramid Scheme
Next they’ll be trying the old Multi-Level Marketing schemes and holding home parties…
This will be a good test of the “bigger fool” theory as we watch to see who actually pays real money for these carbon credits.
Mark T says:
“States in the US can’t print their own money.”
Yes and no. States, as well as other more local municipalities, regularly issue municipal bonds, which is essentially what the Federal Reserve does when it “prints money.”
Um, not quite… close though.
The Fed can simply wish up money without ANY bond being issued. The states can not. (The Fed can do this by many means, everything from changing reserve requirements to simply buying “assets” with it’s own “money” made by changing the bits in it’s computers).
Traditionally, the Treasury actually prints and coins currency (as opposed to “money” which has a ‘store of value’ function that currency does not have… paper currencies inflate away to nothing, gold and silver do not) and these currency items are shipped to The Fed for distribution (via the Federal Banking System) in exchange from some computer bits being set in it’s acconts which it can then spend via checks… (Though the Treasury could just print and spend directly, but that would be cumbersome). The Treasury can also print up and issue bonds (often bought by The Fed; who can use real money to do it or just wish up some bits in it’s computers and use them; though also sold directly to folks from the Treasury).
So, for The Federal Government to spend money it doesn’t have is pretty easy. It can literally print paper and coin coinage and spend that. It can issue bonds, that may be bought by regular folks, companies, other countries, whatever; but if nobody wants to buy them, it can ask The Fed to put some “money bits” in The Federal Government Accounts and put the US Bonds in The Fed vault.
OK, a State can’t do that. Sure, it can print up bonds. But then it must find someone willing to BUY them and that may not happen. (Or may happen only at very high interest rates, as recently happened in California when we had a partial bond auction failure…)
The State can NOT coin or print currency.
The State does NOT have a Central State Bank that can just put some bits in it’s accounts and put the bonds in a vault.
So when The US Government is spending $Trillions it can just do it. ( It only needs to borrow it from the Chinese if it doesn’t want an inflation problem).
When The State is spending $Billions it doesn’t have, it must find someone to voluntarily hand over those dollars.
Big Difference.
When “bankruptcy” is in the air, the bond RATE skyrockets and folks start dumping them. Then the nice Chinese become very reluctant to hand money to The State, even for nice pretty paper with word “Bond” on it. As happened in that recent bond sale when they went for much higher rates than expected (i.e. lower prices and less money to The State) AND they didn’t sell all they had planned.
The worse the hole, the worse this gets, until nobody will buy the bonds at any price.
Then the State hits the wall.
At that same point, the
Banana RepublicUS Federal Government just litterally prints morepesosU$Dollars or asks their friends at The Fed to put more bits in their account and sends over a load of “US Treasury” IOUs. You know, The Fed executives that have to pass a congressional review to keep their job…(For the terminally curious, about then the National Currency hits the crapper and hyper inflation rumors begin. Everyone globally dumps the currency and it either collapses or they have the IMF loan them money and get a pile of “austerity” programs mandated in exchange for the loan. This may happen a couple of times before they eventually cancel the old currency and issue a new one. BTW, the US has done this before… Not just The Confederate currency (of which I have a sample) but also earlier US currencies. )
So, bottom line: Folks who trade bonds stop buying (and are called “The Bond Vigilanties” as they refuse to throw good money after bad) and The State has to live within it’s means. The US Government does not. It can just inflate the currency away to nothing. The game is the same, right up until the last move. Then the State is screwed, while the US Goverment screws all holders of dollar denominated accounts.
E.M said:
“Everyone globally dumps the currency and it either collapses or they have the IMF loan them money and get a pile of “austerity” programs mandated in exchange for the loan. This may happen a couple of times before they eventually cancel the old currency and issue a new one. BTW, the US has done this before… Not just The Confederate currency (of which I have a sample) but also earlier US currencies. )……
…………….The game is the same, right up until the last move. Then the State is screwed, while the US Goverment screws all holders of dollar denominated accounts.”
,,,,,,,,,,,,,,,and this is coming, isn’t it?