'Free market' carbon trading solution to climate change?

From the University of Edinburgh

Free market is best way to combat climate change, study suggests

The best way to reduce carbon emissions and combat climate change is through the use of market forces, according to a new study.

Researchers who monitored the effectiveness of the European Climate Exchange (ECX) – the world’s biggest carbon trading platform – found it to be as efficient as Europe’s two biggest exchanges, the London Stock Exchange and the Euronext Paris.

Using free market platforms like the ECX to combat climate change could provide the basis for the introduction of a mandatory emissions cap and trade scheme worldwide.

The report found that the value of the trades on the ECX were higher after the market closed, a sign of growing sophistication within platforms. It means that trades were made with greater confidence based upon increasingly detailed information.

Researchers said there are also signs of maturity based on increased liquidity – the immediate availability of a party to trade with – and price efficiency, which means all available information is incorporated into prices so they are traded in a relatively transparent manner.

The ECX was created by the EU Emissions Trading Scheme (EU-ETS) in 2005 to help the European Union (EU) achieve its obligations under the Kyoto Protocol to reduce carbon emissions.

The EU set limits and issued permits for how much carbon firms could emit into the atmosphere. If companies exceed their limit, they incur regulatory penalties.

To avoid this, the EU-ETS allows firms with high emissions to buy the permits of other companies on platforms such as the ECX. By creating a market, it gave firms a financial incentive to reduce their carbon emissions.

Researchers said that changes are needed to ensure the EU-ETS survives Europe’s economic downturn. Since the study appears to confirm the ECX’s effectiveness, researchers say the EU-ETS should be allowed to self-adjust emission caps in reaction to changes in the Eurozone’s fortunes and industrial production.

Gbenga Ibikunle, from the University of Edinburgh Business School, said: “While individual responsibility for combating climate change is important, much needs to be done to incentivise companies – especially those who emit most of the world’s carbon – to cut back too. This study shows that free market mechanisms such as the EU-ETS can be effective in doing that. Several other schemes around the world are already learning from this and adopting it as a model.”

The paper is published in the International Journal of the Economics of Business.

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more soylent green

A “free market” created entirely by regulation for something that has no market value? Count me in!

I like this idea, I will hold my breath for 30 seconds for only $100.

Jimbo

The best way to reduce carbon emissions and combat climate change is through the use of market forces, according to a new study.

There is no solution required to tackle an imaginary non-problem. We need to look at ways to subsidize the emitters of carbon dioxide. This is a con job and I am not buying.

Randall J. Donohue et. al. – 31 May, 2013
Abstract
CO2 fertilisation has increased maximum foliage cover across the globe’s warm, arid environments
[1] Satellite observations reveal a greening of the globe over recent decades. …….Using gas exchange theory, we predict that the 14% increase in atmospheric CO2 (1982–2010) led to a 5 to 10% increase in green foliage cover in warm, arid environments. Satellite observations, analysed to remove the effect of variations in rainfall, show that cover across these environments has increased by 11%. Our results confirm that the anticipated CO2 fertilization effect is occurring alongside ongoing anthropogenic perturbations to the carbon cycle and that the fertilisation effect is now a significant land surface process.
http://onlinelibrary.wiley.com/doi/10.1002/grl.50563/abstract
Abstract – May 2013
A Global Assessment of Long-Term Greening and Browning Trends in Pasture Lands Using the GIMMS LAI3g Dataset
Our results suggest that degradation of pasture lands is not a globally widespread phenomenon and, consistent with much of the terrestrial biosphere, there have been widespread increases in pasture productivity over the last 30 years.
http://www.mdpi.com/2072-4292/5/5/2492
Abstract – 10 APR 2013
Analysis of trends in fused AVHRR and MODIS NDVI data for 1982–2006: Indication for a CO2 fertilization effect in global vegetation
…..The effect of climate variations and CO2 fertilization on the land CO2 sink, as manifested in the RVI, is explored with the Carnegie Ames Stanford Assimilation (CASA) model. Climate (temperature and precipitation) and CO2 fertilization each explain approximately 40% of the observed global trend in NDVI for 1982–2006……
http://onlinelibrary.wiley.com/doi/10.1002/gbc.20027/abstract
Abstract – May 2013
…….However, this study hypothesizes that the increase in CO2 might be responsible for the increase in greening and rainfall observed. This can be explained by an increased aerial fertilization effect of CO2 that triggers plant productivity and water management efficiency through reduced transpiration. Also, the increase greening can be attributed to rural–urban migration which reduces the pressure of the population on the land…….
doi: 10.1007/s10113-013-0473-z
______________________
Abstract – 2013
“…..,.,.the increase in gross primary productivity (GPP) in response to a doubling of CO2 from preindustrial values is very likely (90% confidence) to exceed 20%, with a most likely value of 40–60%…..”
doi:10.5194/bg-10-339-2013, 2013.

A free market for which there is a monopolistic suplier?
EU Emissions Trading Scheme, emphasis on “Scheme”.

Jimbo

To avoid this, the EU-ETS allows firms with high emissions to buy the permits of other companies on platforms such as the ECX. By creating a market, it gave firms a financial incentive to reduce their carbon emissions.

The BIG BANKS have absolutely nothing to do with this con job. Sheesh! Just say no.

For $1000 I will not fly to New York, for $2,500 I will not fly to China.

jai mitchell

You might talk to Willis about this. As Eli Lehrer (ex Heartland) of R Street points out

If conservatives don’t begin to engage on the important issue of climate change, we’ll cede the debate.

jai mitchell

interesting, more cut off lows in eastern pacific
http://www.ssd.noaa.gov/goes/west/nepac/flash-wv.html
looks like surf is up in Hawaii. . .
and eastern atlantic
http://www.ssd.noaa.gov/eumet/neatl/flash-wv.html
seems to be a global phenomenom. . .

Carbon markets reward inefficiency – they’re communism in action.
Say two companies start by producing the same amount of goods.
They are both allocated the same number of carbon permits.
Then one company increases production, through aggressive marketing and cost cutting.
In a normal market, they take market share from their competitor – their reward for hard work is more profit.
But in a carbon market, they have just increased carbon usage. They have to buy carbon credits from their poorer performing competitor. Their reward for working hard and improving their processes is to pay a tax to their lazy, less efficient competitors.
Carbon markets are eerily similar to the “equalisation of opportunity” bills in the story Atlas Shrugged – schemes in which “costs” were shared according to criteria other than who incurred them, as a method of looting the productive and hard working.

John Brisbin

I am willing to not fly to New York for only $900 and I will throw in three not-raised hogs.
(http://www.joke-archives.com/govt/notraisinghogsbusiness.html)

Jimbo

Why is Deutsche Bank interested in controlling the trace rise of a trace gas called co2? I am baffled and confused. Can someone please give me some information.

14 Dec 2012
Deutsche Bank staff jailed in carbon trading fraud crackdown
Employees accused of money laundering or obstruction of justice, as UK’s FSA launches probe into dubious carbon credit sales tactics
http://www.businessgreen.com/bg/news/2232113/deutsche-bank-staff-jailed-in-carbon-trading-fraud-crackdown

But hey, I have just been told that:

Free market is best way to combat climate change, study suggests

There are many, many more co2 cons and scams reported but I am just toooo tired right now. Maybe other should take a look.

Jimbo

Ooops again. My last blockquote went pear shaped.

Jimbo

Oh, I should have mentioned that the reason it went pear shaped is because our electrical power went out…….again. Three bloody times this evening. This is what happens when you don’t live in a modern economy. I am working from the light of my monitor and can’t see the damned keyboard clearly. This is what it may mean for you one day. Just say no to these con jobs. I know the end result.

Konrad

“Using free market platforms like the ECX to combat climate change could provide the basis for the introduction of a mandatory emissions cap and trade scheme worldwide.”
Absolute blithering idiocy. A “free market” where the “product” is just certificates for hot air produced by one supplier and their use mandated by an unaccountable, unelected EU government?
As adding radiative gases to the atmosphere does not reduce the atmospheres radiative cooling ability, there is no need to control CO2 emissions. As to supplies of hydrocarbon fuels, market forces already control those. There is already a market for CO2 as an industrial gas. CO2 cannot cause dangerous global warming even if all known and projected hydrocarbon reserves were consumed. A market for the non-production of CO2 is an therefore an artificial construct that must be viewed as a ponzi scheme requiring the intervention of the courts or as a fraudulent tax negating the rule of law and authority of any government introducing it.
A true free market for the non-production of CO2 could be devised such that it was not a de-facto suspension of democracy or in breach of corporate laws. In such a market, “carbon guilt” businesses would produce and sell “carbon guilt” certificates bought by choice by those who believe in global warming. The guilt price per tonne would be set by market forces. Carbon guilt businesses would then spend the money from guilt certificates on alternative energy plants that were cost competitive with hydrocarbon power plants or research into other energy systems. Carbon Guilt businesses that charged too much per tonne or did not provide enough power plants to offset their customers guilt would fail.
I suspect that for a truly free market carbon guilt business the message from the market would be very loud and very clear. Ie: “Put a sock in it you trough feeding doom monger, take you BS brochures and get of my property this instant!”

Ian W

As carbon dioxide has been shown to have no effect on climate a “free Market’ carbon trading system will have zero effect on the climate. It will make bankers and the original market creators rich at the expense of the energy users – and that is its aim. It has nothing whatsoever to do with ‘climate change’ which will continue however many unicorn taxes the politicians and bankers dream up. It is all a confidence trick to enrich politicians.

pat

if this CO2 trading bubble ever gets going, watch out in case your retirement funds get invested in it, without your permission. meanwhile:
16 July: Bloomberg: Alex Morales: Each Degree Celsius of Warming May Raise Seas 2 Meters
Sea levels may rise by more than 2 meters (6.6 feet) for each degree Celsius of global warming the planet experiences over the next 2,000 years, according to a study by researchers in five nations.
The research, published today in the Proceedings of the National Academy of Sciences, attempts to iron out the impact of short-term fluctuations in sea levels, examining changes over a longer term for which forecasts are more certain…
“Continuous sea-level rise is something we cannot avoid unless global temperatures go down,” Anders Levermann, the lead author of the study, said by e-mail from the Potsdam Institute for Climate Impact Research in Germany, where he is based…
Researchers from Germany, the U.S., Canada, Spain and Austria also contributed to the study. They used computer models and analysis of past trends in sea levels derived from sediments and raised ancient shorelines to make their predictions…
http://www.bloomberg.com/news/2013-07-15/each-degree-celsius-of-warming-may-raise-seas-2-meters.html

Resourceguy

See the ethanol mandated RINs by EPA if you want to see where this is all going.

SkepticGoneWild

Eli,
This has nothing to do with conservatives. It has to do with gullible morons (like you) who have not one ounce of scientific common sense. There is no climate crisis.. Our current climate is in no way unusual per the data.. You have your panties all in a wad over some minor late 20th century warming. Your “droppings” along the bunny trail is a perfect description of your musings. Rather than B.S., you engage in bunnysh*t. Same thing. I suggest you go back to school and try to understand the concept of the scientific method, which has nothing to do with politics. Your absolute stupidity in scientific matters is amazing.

Bush bunny

What a con! Same as solar power panels cutting CO2., what’s that got to do with it! Subsidies push up the price for other consumers.

Just Steve

The carbon trading scheme has been a wet dream of Wall Street types for years. After all, these are the same people who have been trading “synthetic” CDOs (credit debit obligations) and derivitives for years. Synthetic meaning they don’t, in actuality, exist! You just take a real live CDO, and make believe there’s another just like it! Voila, a new “market”.
Even if one were to believe in the so-called wonders of the free market, how can it be a free market if the underlying premise, combating climate change, is a canard in the first place? How do you combat that which you cannot control? The hubris is breath taking.

The best way to reduce carbon emissions and combat climate change is through the use of market forces, according to a new study.

Gee, why didn’t the designers of the catalytic converter think of that? Or the designers of the smokestack scrubbers?

Using free market platforms like the ECX to combat climate change could provide the basis for the introduction of a mandatory emissions cap and trade scheme worldwide.

The ultimate goal? (How do you tax the ocean and trees?) Enron opined their ideal in the early 1990s after their $20 billion/yr sulphur dioxide cap-and-trade profit was to find a way to do it to CO2. The problem was CO2 wasn’t a pollutant, so they had to figure out a way how to make it one. New Zealand investigative reporter Ken Ring exposed this in 2006.

The 1990 Clean Air Act amendments authorized the Environmental Protection Agency to put a cap on how much pollutant the operator of a fossil-fueled plant was allowed to emit. In the early 1990s Enron had helped establish the market for, and became the major trader in, EPA’s $20 billion-per-year sulphur dioxide cap-and-trade program, the forerunner of today’s proposed carbon credit trade. This commodity exchange of emission allowances caused Enron’s stock to rapidly rise.
Then came the inevitable question, what next? How about a carbon dioxide cap-and-trade program? The problem was that CO2 is not a pollutant, and therefore the EPA had no authority to cap its emission. Al Gore took office in 1993 and almost immediately became infatuated with the idea of an international environmental regulatory regime. He led a U.S. initiative to review new projects around the world and issue ‘credits’ of so many tons of annual CO2 emission reduction. Under law a tradeable system was required, which was exactly what Enron also wanted because they were already trading pollutant credits. Thence Enron vigorously lobbied Clinton and Congress, seeking EPA regulatory authority over CO2. From 1994 to 1996, the Enron Foundation contributed nearly $1 million dollars – $990,000 – to the Nature Conservancy, whose Climate Change Project promotes global warming theories. Enron philanthropists lavished almost $1.5 million on environmental groups that support international energy controls to “reduce” global warming. Executives at Enron worked closely with the Clinton administration to help create a scaremongering climate science environment because the company believed the treaty could provide it with a monstrous financial windfall. The plan was that once the problem was in place the solution would be trotted out.

Read the rest here:
http://www.investigatemagazine.com/archives/2006/03/investigate_oct_5.html

Rich Lambert

My electrical power went off this morning. That is a crisis. Carbon emissions and climate change is not a crisis.

TBear

The Bear quotes:
`Using free market platforms like the ECX to combat climate change could provide the basis for the introduction of a mandatory emissions cap and trade scheme worldwide.’
Yeah, dream on. Stopped reading at that point. Another `world government’ fantasy.

RoHa

It seems to me that every time I hear some loud spruiking of free markets, it is shortly followed by a bunch of people with nasty haircuts getting hold of wads of cash (from my tiny income and modest savings), and then a financial disaster in which I get totally screwed.

Gary in Ridgecrest, CA

All of these people keep assuming that CO2 is causing climate change. It just ain’t so!
Game, set, match!!

SkepticGoneWild 🙂 appears to be more in a twist than Eli. Opinions vary.

thingodonta

This just might be a good idea, because market force might be the best mechanism to decide that carbon emissions don’t need to be reduced in the first place, and that dangerous AGW is not going to occur.
This kind of ‘accidental discovery’ when market forces are unleashed has happened before, e.g. when Gorbachev decided to introduce market forces and a greater degree of openness to improve and/or reform soviet communism-the result was the end of soviet communism itself. This was not intended, but it occurred because market forces found out that the system was based on fatally flawed foundations to begin with.
I would also argue that Christianity’s stranglehold on western society followed a similar pattern, although the process here is far less clear and more controversial; once Protestantism gained a foothold and rebelled against the authority of the Roman Catholic church, it unleashed a spirit of inquiry and individualism that eventually rebelled against the authority of religion altogether, as well as, according to the sociologist Weber, provided the driving force behind market capitalism itself.
Market forces are dangerous when one tries to use them for political purposes, they tend to turn against you, unless the reasons you introduce them are based on fundamental human realities to begin with.

GlynnMhor

Just think of how bad a bubble was created with asset backed commercial paper, debt obligations that actually had real tangible assets associated with them, and then consider how much of a bubble could be created out of carbon indulgences based on nothing at all.
Banksters are probably having wet dreams at the very thought.

There’s nothing “free market” by implementing these crazy carbon trading schemes. There’s no negative demand for air. Creating an artificial market and artificial demand is the antithesis of “free market” concept.

higley7

Of course, since CO2 or any gas at any concentration in the atmosphere cannot detectably warm the climate, carbon taxes or any other misbegotten effort to decrease carbon emissions WILL DO NOTHING. OUR CLIMATE IS NOT CONTROLLED BY CO2.
CO2 IS PLANT FOOD AND IT IS GREENING THE PLANET.
Controlling carbon is solely about controlling people.

Tom J

It’s been so many years ago that I worked, briefly, behind a cash register that I don’t really remember it anymore. But, I suspect it’s a relatively mundane, unrewarding job. So, when I happen to be with my sister, my older sister, and she whips out that credit card (faster’n Doc Holloway can pull a gun) to buy something I decide to spice it up a bit for the cashier. I tell my sister quite loudly, “You’re not using that credit card are you!? It’s probably reported stolen by now!” Oh, does she hate it when I do that, which is why it’s so much fun to do. And it provides a moment of levity for the cashier.
But, when I’m alone at the cashier I have to be more creative. If I’m paying the bill with a piece of paper with a fairly large assigned (temporary) value and they hold it up to the light to check it I tell them not to worry; I did a good job printing it last night. But usually I’m not paying a big bill, so if I pull out, say a twenty, I employ a different line. I tell the cashier it’s really a two hundred dollar bill; they just can’t see the extra zero; but I assure them that it’s really there. Sometimes I tell them that that twenty dollar bill turns into a two hundred dollar bill at midnight.
Now here’s the thing. You, and the cashiers, and certainly I know that the foregoing is all a buncha bull poop. Now, the absolutely worst that could happen is that someone doesn’t find those shenanigans funny (such as my sister). But, usually the cashiers get a hoot out of it. Quite a few play along, handing me change that they assure me changes at midnight too.
Did I just write, ‘Now here’s the thing?’ Well, here’s the real thing. What if the foregoing wasn’t a description of just jokes that were being played by me? Just how well would it work if the cashiers really believed me? Handed me back change based on the magical, fictional values of twenties that would morph into two hundreds at the stroke of midnight? What is hard earned money worth then? Or, on the other hand, what if you’re not using magical money? You’re using real money? But buying things that don’t really exist except in magic. You can’t see it, touch it, hear it, taste it, or smell it. But, I assure you, if you give me good money for it it’ll magically turn into something at midnight. In the future. Now, what I was playing was an obvious joke. Well, sans that penultimate word; this scheme is too. I doubt it’ll lead to laughter though. More like tears.

Bill H

The Chicago Carbon Market … Crashed.. Because the free market saw it as a fraud…
I’m all for letting the free market decide what is truly worthy of money spent.. No Government prop ups and watch what happens to the crap…

AndyG55

“Using free market platforms like the ECX to combat climate change could provide the basis for the introduction of a mandatory emissions cap and trade scheme worldwide.”
Gotta love the way they use “free-market” and “mandatory” in the same sentence !!

AndyG55

jai says…
“looks like surf is up in Hawaii. . ”
wow.. like that’s NEVER happened before !! .. roflmao
you really do make some very STUPID comment jai !

phodges

Uhuh.
A mandatory free market!

Frank

“I like this idea, I will hold my breath for 30 seconds for only $100.”
And I have a piece of coal in my hand. For $50, I won’t burn it this winter.

Mike M

The Michael Milken solution to saving the planet.

Janice Moore

FANTASY LAND:
Carbon Credit “Free” Market is SO YESTERDAY, Gbenga. Edinburgh needs to get with it!
EU carbon permits, which have plunged 88 percent since 2008, would need to trade at 10 times their current value of about 4 euros ($5.28) a metric ton to prompt utilities to switch to cleaner natural gas from coal, according to a Bloomberg fuel switch calculator.”
[Source: EU Should Move Beyond Carbon Market to Shut Coal, IEA Says, Mathew Carr & Sally Bakewell, June 10, 2013, Bloomberg News: http://www.bloomberg.com/news/2013-06-10/eu-should-move-beyond-carbon-market-to-shut-coal-power-iea-says.html%5D
TOMORROW LAND:
But, that isn’t stopping good ol’ Rudd:
“CANBERRA, July 16 (Reuters) – Australia’s government moved on Tuesday to scrap its carbon tax and bring forward an emissions trading scheme …that will be linked to the European carbon market … The conservative opposition has promised to scrap the carbon price altogether if it takes power, with opposition leader Tony Abbott dismissing the ETS as a ‘so-called market in the non-delivery of an invisible substance to no-one’.”
[Source: James Grubel, Reuters, June 16, 2013, http://www.reuters.com/article/2013/07/16/australia-carbon-idUSL4N0FM05620130716%5D
VOTE CONSERVATIVE! It MAKES SENSE!

Brian

I’m having some trouble understanding the game so I have some motivation speculation.
I have it as a given that this is a scheme whereby those families that own 99% of the western world can get another Log removal of whatever is left from us working sods. I just can’t see how trading smoke translates to profit, unless it’s a game of last person left holding the imaginary air gets to keep it, or if it is a way to drive up prices by creating an artificial scarcity (like Enron did with the rolling power outages in California a few years back).
I suspect that whatever the game is, the real winner in this will be China as they will continue to grow their economy as the rest of the great powers vie to out-shrink each other.

Janice Moore

And who wins QUOTE OF THE DAY today?!!!
JAI MITCHELL!
“… move along people. . .nothing to see here… .” [Jai Mitchell]
Preeee-cisely. #[:)]

dp

If we are to engage in battle with nature over the climate I respectfully ask we have an end-game plan, that we clearly identify our goals, state the conditions that define our success, and method disengagement. We should define rules of engagement that are acceptable to all sides in the ensuing conflagration, and the extent of collateral damage to innocent non-combatants that are acceptable. If our success is defined as arresting climate change at some condition or range of acceptable variation we must give all nations a say in what that climate shall be.
Or maybe we should just say WTF are we thinking? This is crazy!

Janice Moore

dp: Nicely stated. Couldn’t agree more.
[LOTS of excellent comments above, every, er, well, JUST about everyone, (cough)!]
Great battle strategy analogy.

Theo Goodwin

Enron was fraud, fraud, fraud. How could anyone believe that this scheme could possibly be different?

The carbon market crashed already. They’re trying to dress it up and put it back out there. Free market? Mandatory? When are they going to learn?
When THIS bubble bursts, it’s going to make one heck of a KABOOM!

DR

Free market as in forcing or subsidizing businesses to produce or purchase a product.

A mandatory “free” market with quota’s to artificially prop up the price.

STRASBOURG/LONDON, July 3 (Reuters) – The European Parliament after months of bitter debate backed a plan on Wednesday to boost carbon prices, throwing a lifeline to the EU Emissions Trading System (ETS) and the bloc’s push for greener energy.
EU politicians in Strasbourg voted 344-311 in favour of temporarily removing up to 900 million permits from trade, tackling oversupply that has sent carbon prices to record lows
.

To avoid this, the EU-ETS allows firms with high emissions to buy the permits of other companies on platforms such as the ECX. By creating a market, it gave firms a financial incentive to reduce their carbon emissions.
and then removes 900 million permits from trade, creating an artificial shortage, trying to penalize firms for using the very mechanism the EU_ETS created.
Barely in business and the politicians are already playing games, trying to rig the market. Imagine what it would be like if the market was worldwide and there was serious coin involved. The dutch tulip mania and the south seas trading company will seem tame by comparison.

RockyRoad

Eli Rabett says:
July 15, 2013 at 6:47 pm

SkepticGoneWild 🙂 appears to be more in a twist than Eli. Opinions vary.

You said the operative word, Eli–“opinions”.
Very little in science is based on opinion. Science is generally a lot more precise than that. And because of this wonderful precision, we can generally agree that politicization of science isn’t beneficial.
Except to those holding the “purse strings”, of course. And this is potentially the biggest purse out there.
If it happens, the rest of us are going to take a drubbing.

TRBixler

Free market in political tripe.