Guest essay by Eric Worrall
h/t JoNova – carbon traders are complaining that over-issuing of carbon permits, a lack of political will to make carbon trading work, has destroyed investor confidence in the industry.
Tough to Keep the World From Warming When Carbon Is This Cheap
Carbon markets, the free-enterprise solution to saving the world from global warming, are now in danger themselves.
The idea was simple enough: Set a cap on carbon emissions, issue enough permits to allow power plants, refineries and the like to stay within those limits and then shrink the cap over time to achieve reductions. The companies whose emissions fall fastest can sell their permits for a profit to slower responders — call it a reward for good behaviour.
The reality, though, is more complex. Undercut by a lack of political will on the size of caps and overtaken by costly new environmental mandates, carbon markets in the U.S., Europe and Asia are collapsing, with prices so low they’ve become virtually valueless. The credits auctioned in the U.S. Northeast in June, for instance, sold for just $4.53 a short ton, a 40 percent drop from December.
“Climate policy has been muddled and messy,” said Michael Grubb, a professor at University College London’s Institute for Sustainable Resources who has advised the U.K. energy regulator. “Governments have set inadequate targets due to lobbying pressures and because they didn’t think carefully enough about overlapping efforts. That has destroyed investor confidence that carbon prices will rise.”
…
The problem is that the permits are selling at a slower and slower rate. The surplus of allowances is becoming so large in systems run by Europe, California and Quebec — which together account for more than 90 percent of global trading — that by 2022 it could cover the emissions spewing from every car on Earth for a full year, according to estimates by the London environmental group Sandbag Climate Campaign CIC and Bloomberg New Energy Finance.
In California’s market, all 23 million allowances sold in an auction in 2014. In May, 7.3 million permits found buyers, only 11 percent of what was put up for sale.
…
What went wrong?
Carbon trading is the only “market” I know of, in which all the players who matter benefit from fraud.
Issuers of carbon credits benefit when they sell fraudulent permits – they are making money for nothing.
Buyers of carbon credits benefit when they buy from a market flooded with fraudulent carbon permits – fraud keeps prices down.
Regulators benefit personally from fraud, when they receive bribes to turn a blind eye to dodgy dealing.
Politicians benefit from fraud, and from overissuing of permits, because it makes them look like they are doing something about CO2, without actually doing anything which might damage their re-election chances, or have a significant detrimental impact on jobs or the economy.
The only people who appear to be suffering are merchant bankers, who can’t find anyone willing to buy and hold carbon credits as an investment, because everyone believes prices are going to continue spiralling down into total collapse. And of course, anyone who was silly enough to believe carbon markets might have an impact on CO2 emissions.
I’ll buy a 100 billion tons of carbon credits for a penny, any takers?
Why? You’ll be wasting that penny. 😉
I’d demand my tonnage in liquid CO2.. I’ve got gardens that’d love it!
If it was liquid, it would have a lot better industrial usages in that quantity.
I planted half the trees in Yellowstone Park back in 1950 and they have earned me 100 trillion credits (so far). I suppose I can part with a measly 100 billion but my sell offer is 2 cents.
Firm, or negotiable? I hear they have them at Wal Mart, wicked cheap.
Buy and hold? Nonsense. Think of the overnight margin rates.
As usual, the “smart money” isn’t fooled. I think within a couple of years this whole ball of nonsense is going to just quietly sneak away.
Will it take Al Gore with it when it sneaks away?
Trying to sell trash to anyone does not usually end up being profitable !
Oh I don’t know, the Kardashians have made a mint selling themselves…
Just wondering – what’s the difference between fraud and short selling that is permitted in most markets?
The carbon market is also the only market that is solely dependant on government legislation and nothing else.
Short selling is not a fraud.
Do some reading about it…
“Just wondering – what’s the difference between fraud and short selling that is permitted in most markets?”
Short selling is when you want to buy a commodity or a stock and I sell you a contract to deliver what you want. If I currently posses the commodity or stock you have no problem with that apparently. But if I intend to buy the item later to deliver to you — how it that fraud? It is only a crime if I don’t deliver as promised. (He who sells what isn’t his’n, Must buy it back or go to prison)
Short selling is what makes the commodities market work and it helps the agribusiness companies, large and small, reduce risk and manage their business. After all, there is no market in Orange Juice unless some grove owners sell contracts for delivery at a later date, which is usually harvest time but not always.
Fraud is a vastly difference thing that selling short on the commodities market. (or stock market for that matter) If you don’t like it, then don’t do it. (can be very, very hazardous to your finances)
The “carbon market” on the other hand is a fraud in that it is based on buying and selling “carbon credits” to satisfy the mandates of the Government Regulations which are based on whim and nonsense. I would like to buy and sell “MPH Credits” so if I am caught doing 85 mph in a 70 mph zone on I-4, I could then pull out a 15 mph credit to hand to the cop. Why not? Makes much more sense than “carbon credits”.
Well, Mark, carbon isn’t the first cap and trade system. The national sulfur cap and trade was a phenomenal success, and there are regional schemes for nitrogen oxides, and in Houston, Highly Reactive Volatile Organic Chemicals.
It’s that last example which is most relevant to this. In that, the original distribution was far too generous. With a few companies doing basic steps to drop their emissions, the value of the credits plummeted. The TCEQ is currently dropping the total allocations by about 20% over the course of several years, which has allowed the system to actually function.
The difference between these and the carbon markets is that to get extra credits for any pollutant, you must demonstrate actual reductions of a non-covered source. For example, shutting down a major combustor that was a shade too small to participate in the system. To compare with CO2, building a wind turbine or solar panel generates credits, whether or not something shuts down because of it. In short, pollutant cap and trades generate credits based off reductions from prior emissions. CO2 cap and trade generates credits based off reductions from a theoretical future. In short, CO2 has no cap.
How many “carbon credits” does it cost for one bag of good quality charcoal briquettes for my backyard grill?
/snark
Charcoal is “carbon neutral.”
True but only if you rub two sticks together to get them burning.
Why would charcoal be “carbon neutral”? It’s concentrated carbon, with all the volitiles in the original wood offgassed. Do these people even know what’s burning when they burn stuff?
Because it was created by baking wood. Over the course of its cycle, the same amount of CO2 is removed and added to the atmosphere (ignoring all the side-emissions from the growing, processing, and delivery system, almost all of which is fossil-fired). Therefore, charcoal is considered “green”
And the USSR goes broke.
The Union of Soviet Socialist Republics was a socialist state on the Eurasian continent that existed between 1922 and 1991.
It hasn’t existed for 25 years.
I think he means USES, Union of Socialist European States, aka the EU.
I am a female.
“I am a female.”
Why limit yourself? These days you can be whatever you want to be. Apparently.
Careful. It is its right to declare itself as any gender it chooses, any time it chooses.
Well, I suppose I can claim first prize in the footshooting competition.
Apologies.
Carbon credits are Mugabenomics
sounds like a personal problem to me…
markets are generally smarter than any one person or small group of people.
(assuming, of course, there is little or no governmental interference in how they operate)
In the end you have to shut down U.S., and here in California, all concrete production. The more insane the regulations, the more virtuous people feel, until they have to implement shutdowns of industry sectors. We could go back to making roads and houses out of adobe., but alas, it has stability problems in earthquakes. In the meantime, some are reacting to Trump’s nomination. If he wins, carbon credits are over for the U.S. Only California implemented them in the U.S., which makes the market too small. As product costs go up to pay for credits compared to other states without this market, manufacturing will move out of state. As that starts to occur, the ramping down of available credits will stall. Shipping in concrete from out of state will cause cost of concrete to go orbital. Then all highway construction will go orbital. Oh yeah, state pays for the highways. However, this tax did boost the CA bond rating, which I think is now out of junk status, so politicians are in brief ecstasy over the new income. The trading has one key problem. You can either pay more for decreasing credit pool, or you can move overseas. So industry paying is more of a one time thing. Only stiffing people on gasoline will survive here in CA.
What makes you think cement plants won’t get a pass? The British Columbia Carbon Tax was amended to exclude cement plants and a few other key industries. Nothing is ever as it seems – especially in politics.
Check out the cap-and-trade agreement situation between California and Quebec as it presently stands in the above Bloomberg article.
Ontario has also signed on to the above agreement but has not yet implemented this cap-and-trade agreement but is the process of doing so.
California is already way overbuilt. both in terms of concrete and people. Skyrocketing concrete prices in CA would be a significant restriction on growth and repatriate a lot of Silicon Valley money back to the states with more sensible policies.
Don’t worry. I understand more people and business are moving out than moving in.
In for the beaches, out fleeing the Jerry Browns.
Bjorn Lomborg’s latest update claims that the fra-dulent Paris COP 21 agreement will cost one hundred TRILLION $ and reduce global temps by 0.17 C by 2100.
IOW 100 TRILLION $ will be wasted for no measurable difference at all. Why isn’t this fra-d exposed by journalists all around the globe?
Remember Harry Markopolis exposed the Madoff Ponzi scheme fra-d but couldn’t get the US SEC to take any interest. He worked hard for another 9 years before he was vindicated. He told the US Congress that he was convinced of Madoff’s fra-d after looking at the data for ONLY 5 MINUTES. Unbelievable.
Of course the CAGW mitigation fra-d infects the entire world and makes Madoff’s crime look like a fleabite. When will they wake up? Here’s Lomborg link.
http://us5.campaign-archive1.com/?u=40608ac93880d1cb2444f1d20&id=7a48e19e22&e=8b63f2f893
Here’s Harry Markopolis’s quote and the Wikipedia story exposing the greatest Ponzi scheme fra-d in history.
“Markopolos later said that he knew within five minutes that Madoff’s numbers didn’t add up. It took him another four hours to mathematically prove that they could have only been obtained by fraud.” I wonder what Willis Eschenbach would make of that data?
Here is the story. https://en.wikipedia.org/wiki/Harry_Markopolos
Sorry I’m in moderation again. I left a U in the F word again. Grrrrrr.
They should not have “scorned” Lomborg.
They have made a powerful enema for themselves.
Freudian slip Andy? LOL!
Enema of the state?
Or pubic enema number one?
Well, it’s definitely true that many of them suffer from Cranial-Rectal Inversion Syndrome, so…
If you open it to a truly free market, (cost of entry = 0, many parties, interchangeable goods), it doesn’t work, interesting …… then one must conclude that it’s not a real market
“then one must conclude that it’s not a real market”
That’s what I conclude. It looks like more of a scam than a market.
Or, there is no such thing as a free market.
There are many free markets. The only requirement is the government doesn’t get involved.
“ that it’s not a real market”
Right, …… and neither are any of the Stock Markets (NYSE, NASDAQ, etc.).
In actuality, all Stock Markets are nothing more than a gigantic “poker game” whereby the controlling houses (governments) takes a “rake-off” of every hand of poker that is played …. and the stock brokers and “big” money bettors control and manipulate the “bid n’ ask” prices to hedge their own “betting”.
Scammers and leeches upset that political extortion has dried up on this flimflam. Demand more.
It’s a supply and demand economy it seems to me, Pat . . First you supply some “foundation” money, then you can demand more ; )
Can carbon credits be used in a wood stove?
It’s not called a wood stove anymore Gamecock, it’s now referred to as a bio-mass conversion unit.
Just helping you out.
Woodstoves still exist. If you pay for it yourself and receive no subsidy payment for using it. Then it’s still fair to call it a woodstove
The minute that the state becomes involves – then I’m sure that it becomes a biomass converter/heater/boiler or some such thing.
The critical difference being that in the second instance other people are charged money when you burn stuff to heat your home or provide yourself with hot water.
The more heat that you squander – the more money that other people have to pay you.
I proudly own a woodstove.
No other party was involved in its purchase, installation or use. Nor in the growing of the trees, felling of trees or seasoning of wood etc.
I transform sunlight into heat via this simple process.
No, credits, money, taxes, subsidies, tariffs, regulations, restrictions, obligations etc etc are involved or required.
I’m probably breaking the law.
Maybe I should turn myself in.
More to the point Klem, why would Canadians want a cooler world?
I thought it was only a woodstove if you could cook dinner on top of it. Grandma actually has one of those at her place, although it hasn’t been fired up in decades. Her woodburner on the other hand gets used every winter, just like ours.
One can only wonder what new and insane idea the CARBON DIOXIDE traders (shysters/rent seekers) will come up with to recoup their losses. Solar and wind technologies are already massively expensive proven failures, the mind truly boggles. The only thing certain is that whatever ‘it’ is will cost the taxpayers a lot of money.
I thought that the carbon market here in the USA had shut down…
http://www.nytimes.com/cwire/2011/01/03/03climatewire-chicago-climate-exchange-closes-but-keeps-ey-78598.html?pagewanted=all
The real problem is that the money has to come from two sources, taxpayers or consumers. The greens think of it as magic, the investors think they are going to make a killing with no risk. Two many people thinking magic will overcome basic economics and basic physics of energy production.
Don’t invest in magic and express opposition every time someone suggests you should pay the greens and/or green power investors. Find groups that work on your behalf and support them instead.
“… taxpayers or consumers.”
You forgot the third source;, it’s the walk-in vault full of gold coins, cash and jewels that all business owners have in their mansions (like Scrooge McDuck.). If those guys weren’t such hoarders there would be plenty of money for everyone.
http://s2.quickmeme.com/img/01/01bc72c015c5c793f819e986c337218900cddd9be5c6c57440b31d3ab7226c05.jpg
DonM.. Or the fourth, and currently most active source here in the US, the printing press.
My favorite was from a comic book in the late 50s – Huey, Dewey and Louie jump into Uncle Scrooge’s money-filled swimming pool and he says, “No diving! You just bent a penny I earned at the 1904 St. Louis World’s Fair!”
I’m sure all rich people are like that, 😉
I disagree. $5/t is my estimation for the social cost of carbon.
Sorry Chris you have the wrong sign on your answer, since CO2 increases Food Production CO2 help Society.
Chris July 9, 2016 at 6:37 pm
“I disagree. $5/t is my estimation for the social cost of carbon.”
Chris, as a “Carbon Unit” your own body has a CO2 concentration of ~56,000 ppm which must be maintained within a range above even say 28,000 ppm just to keep you alive. And you are not “carbon neutral” given that your growth, physical activity, and the products you use – plastics, concrete, asphalt, medications, communications, recreational and fitness devices, food, etc. – require quite a lot of the eeeevillle fossil fuel-producing CO2 you think is a “toxin” and “pollutant” and has a withering “social cost”.
Therefore your own message to and about yourself as a “social cost” is as clear as its solution! If not “For the Children, the Planet, Gaia, the Poor, the ‘obscene Inequality between the rich and poor Nations’!” how about “For The Cause!” or “The long Arc of Justice!”?….What, no Conscience?
Industry?
“Industry is the production of goods or related services within an economy.”
What goods, may I ask, does this “industry” produce?
Suckers.
No the suckers already existed. This industry produces fleece, which it gets from the suckers.
Repeated catastrophic collapse of carbon prices
The problem is not the low price but the repeated catastrophic collapse of carbon prices by political fiat that repeatedly and severely burned “green” investors.
Once burnt twice shy.
When you get burnt three times . . . !!!
Blood And Gore: Making A Killing On Anti-Carbon Investment Hype
FOUR CARBON PRICING PITFALLS TO AVOID
EU’s pilot carbon prices hit over EU30/ton then collapsed to nothing in 2007 from over issuance. Phase II similarly collapsed from > EU30/t to < EU8/t.
PS China also does not play “fair”.
There is nothing “free market” about carbon credits. They are just another socialist govt failure. Nothing unusual here.
I would have called it Green rentseeking, but it’s all the same in the end.
If it were actually warming as fast as the models predicted the stuff would be soaring in price. Nobody wants them because they can look outside and see its not going to be in demand anytime soon. . . .so what else to do? Whine to the government that they are too big to fail!
Awwwwwwwwwwwwwww those poor babies! How are they supposed to save the world if we don’t pay them to do it???? 😛
Bunch of scammers. Anyone even remotely connected, politician or otherwise, should be thrown in jail.
Carbon Trading isn’t a market at all . It is an artificial manipulation designed to separate fools from their money . Deregulated energy markets are the elephant and carbon trading isn’t even a fly on that elephants butt . Most countries are not going to give businesses further reason to move to those” have not” countries like China . China must wonder at how incredibly stupid western governments are .
It’s a total fabrication. Bob Carter used the term “contrived”. https://www.facebook.com/fourtimesayear/photos/a.427072877441780.1073741829.360297500785985/515975331884867/?type=3&theater
https://www.facebook.com/fourtimesayear/photos/a.427072877441780.1073741829.360297500785985/631083467040719/?type=3&theater
https://www.facebook.com/fourtimesayear/photos/a.427072877441780.1073741829.360297500785985/515975331884867/?type=3&theater
Sorry – got my links mixed up. At any rate, I expect oxygen will be on the taxing list next. Or water vapor….
I believe “thingy” is up next. (h/t to Monty Python)
“designed to separate fools from their money”
The problem is that it’s not only the “fools” who are being separated from their money, it’s all taxpayers. If it were only the fools, that’d be an actual free market.
I remember saying years ago that the white shoe boys would be out and about. Problem is they got too greedy and hyper scammed the market. All they had to do was be a bit patient and they all could have pocketed heaps from the gullible alarmists who would have enjoyed the pain (although they would not have actually received the pain – poor old citizen Joe would have copped it big time). The parable of the Old Bull and the Young Bull comes to mind.