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.”
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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.
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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.
Anyone in Canada? Can you explain what that means for British Columbia and it’s Carbon Tax scheme? thanks.
Our carbon Tax in British Columbia is like a sales tax.
For my Natural Gas bill it is about 8% which is more than the cost of the natural gas I use (not the distribution fee).
The carbon tax is just the tip of the iceberg for us taxpayers.
There are all kinds of levies and fees imposed on various products and services.
The provincial government of BC raids the coffers of our mandated car insurance ICBC and our hydro electric utility to the tune of about 700 million dollars a year each.
And the carbon tax fever is spreading to Alberta and Ontario. Canadian conservative parties must stand up and promise to dismantle and eliminate these fraudulent tax schemes.
Why do so many Canadian citizens believe that a tax can change the weather anyway?
Of course carbon credits were over-issued. This is the means by which Russia was bribed to sign up to the Kyoto protocol. Without this the Kyoto protocol would have collapsed for lack of signatories. Now we are paying the price.
If we forget about the fundamental flaws for a moment, isn’t low prices for carbon permits a sign of the system overperforming?
Please correct me if I oversimplify but as I understand it the supply is fixed and demand will vary with CO2 emission. Low prices means low demand means low emissions means world is saved?
Now what could have happened in a rational and informed market is that CO2 emitting industries relocate their production to areas not affected by CO2 regulation and expecting a profit from lower operation costs and SELLING THE CARBON CREDITS THEY GET FOR FREE DUE TO THEIR TRADITION OF CO2 EMISSION?
Now if this become common the demand for CO2 permits will drop and and their value too?
Before we gloat to much over the losses of gullible banks and pension funds remember this is our money lost. The carbon traders that set up this Ponzi scheme have diversified a long time ago and can retire in Gore-style when this bubble bursts.
Unfortunately that will not mean the end to the AGW juggernaut, it will go on by sheer inertia.
Probably Anthony will have to run this blog until the next minor iceage.
“Low prices means low demand means low emissions means world is saved?”
Well.. that or the market is flooded with an artificial commodity that has no real value and costs nothing to produce.
It’s simply supply and demand, no one wants them. So the price goes through the floor.
Add in investor concern over the recent reports of billions in Carbon credit fraud in the EU and the fact no one wants them.. unavoidable, plus corporations and investors are far more skeptical of doom claims than average folk, they may make the noises in public but the bets they are making on agriculture it seems is losses to cold weather.
When money is concerned, screaming activists don’t cut it for financial investors
Carbon credits are now Zimbabwe dollars
Didn’t the mafia make good money from carbon credits?
So they can no longer profit well enough from the alarmism? What a tragedy.
Even if the carbon credit market wasn’t completely rorted, and the premise wasn’t based on massively fraudulent analysis, it has one fundamental failing. It only incentivises DOMESTIC abatement, not global. The EUSSR’s carbon market has achieved only one thing in its sorry 30 year history: Caused emitting activity to move from the EUSSR to somewhere else.
And indeed the EUSSR has reduced its emissions. So steel is now made in China. During Australia’s disastrous experiment with carbon pricing, much of the aluminium industry closed. And China’s expanded 10% pa those years.
Just tweak the plan. Issue the credits for CO2 production.
It wasn’t supposed to be about the money anyway.
Exactly. At least that’s what we were told. Maybe we were lied to.
MAYBE?
“It’s all connected. You’re seeing the fish flopping, it’s the fish flopping. I’m telling you weird stuff like this happens just before the tsunami. When rivers run backwards that should be a warning sign. Next birds will fly backwards and people will just grunt at it, if tomorrows a decent down day, look out next week. I got a tingly feeling here, tingly like as in people are turning in expectations, this could get ugly…”
This moment of apocalypse anxiety brought to you by Cadbury’s Smash
The fundamental problem with a carbon trading system is not fraud (although there is fraud here and there). The real problem is the only states and governments that get on board with this system are the ones with surplus credits to sell. The commodity in question (carbon credits) has no value in and of itself (as opposed to oil or gold, for example). This guarantees that the commodity will never climb in value. The only way for credits to go up in value is if people are FORCED to buy them, so no surprise when there’s no political will.
Carbon trading is part of the economic miracle. It provides employment for market traders, IT professionals, consultants, government departments and a whole army of support services.
It increases world GDP and the benefits of the wealth created flow down through society.
The only problem is that it clearly does not work, and as far as I am aware a carbon trading scheme has never worked. It needs global buy in to the principles, an absence of corruption and unambiguous parameters to deliver the outcomes desired Without this it is simply a further business issue to be manipulated (like tax) to minimise the impacts.
Current situation is really just an exercise in excessive futility.
All warmist climate scientists should be paid in carbon credits. Skeptics, in real money. It would be an interesting experiment.
Real skeptics would require payment in precious metals.
I’m pretty sure that no skeptic would consider anything written on paper to be real money. At least, I certainly feel some degree of skepticism regarding the future value of any fiat currency or traded certificate.
Give me something hard to obtain that has a industrial applications or other utility.
All contributions of this nature will be welcomed!! Thanks!!
“All warmist climate scientists should be paid in carbon credits.”
I like that idea!
So, with current CO2 fertilization greening trend now established – then how long before we see calls for a MINIMUM cap in a cap and trade system – or a subsidy voucher for every ton emitted. i.e. a carbon grant, rather than a carbon permit.
Permission to make the world a verdant productive and fruitful paradise, Sir.
Permission granted…
http://cdn.zmescience.com/wp-content/uploads/2016/06/agstill.3975legend.jpg
Yeah, the people making these crop increases possible should get paid for their efforts.
The wags are out in force for this thread.
We have good taste in whines here.
” Biggest scam on the planet” Matthew Beddoes. Computer hacker that that sold fake carbon credits.
CLM
21st century Tulip-mania. It failed in Europe. It failed in Chicago (and faded quietly away) and now that the insane revived it in the People’s Republic of California, it is soon to fail again, not soon enough after making the poor poorer through too expensive energy.
“And of course, anyone who was silly enough to believe carbon markets might have an impact on CO2 emissions.” It worked very well for SO2 emissions: https://www.epa.gov/sites/production/files/2015-08/documents/arpcair11_analyses_0.pdf
The difference being that SO2 is actual air pollution. But it takes people with at least half a brain to know the difference.
The question is about whether a permit and trading scheme can lead to reductions in a gas that is emitted into the atmosphere. The SO2 example I gave showed that it is. I thought even people with half a brain could stay with the topic of this thread, but I guess I was wrong.
Oh dear. It appears that even a half-brained one can’t understand the reasons why it worked for an actual pollutant, but can’t for a faked one.
Oh dear, I didn’t realize that basic logic skills were so lacking. It is irrelevant whether or not the pollutant is “faked” or not. The question posed was whether a cap and trade system could be effective to reduce a gas which is released into the atmosphere by internal combustion engines. The answer is yes.
Bernie Madoff eat your heart out…………
Only last year, Goldman Sachs organized it, they even went to the extent of removing two great obstacles to its progress, namely Tony Abbot and Stephen Harper who were two Prime ministers of Australia and Canada in that order and smoothing the way.
It’s a colourless, odourless, diffused in the atmosphere at very low proportions is almost harmless, and to all plants is a life giving gas and thus is one of the most vital gases on, in and around on the planet. Obama, had it declared a ‘poison’ for goodness sakes but then, what did a human rights activist/organizer/agitator ever know about science and FA is your answer.
Amorality, investment banking are indivisible, screwing people over is what they’re all about and the best, should I say the most egregious conmen on the planet and best paid btw work in, Goldman Sachs.
A CO2 emissions limitations treaty was what the boys in GS wanted, in Paris it was signed and supposedly the carbon trading exchanges were going to make GS even richer than Croesus, Midas and the Fed Reserve put together – I mean how much can you dig, Man?
China didn’t sign, India won’t, Trump is coming, the UK told the EU where to go and one day Goldman Sachs will disappear into a very hot hole in the bowels of the earth and the world will shout THANK ***K for that and HIP BLOODY HOORAY!
…Come on…tell us how you really feel ! LOL………..+100 likes….(and +10 for Trump) !
Power generation has had/did have credit trading programs for SOx & NOx. Don’t know the current state of those programs. Trading allowances are written into EPA’s CPP.
It always kills me when politicians talk about “market based solutions.” They think if they can cargo cult the free market they’ll get the great results they’re hoping for (all while helping their cronies). But if they allow too many actual market forces to occur then those market forces will start to drive things toward optimal price and capital structures, etc., basically causing results that the politicians never wanted and that their cronies hate. It never fails.
Of course it’s a fraud. I know somebody who has a natural gas generation system to supply power and hot water to the building, and he gets paid carbon credits for it by the government, and saves himself 40 grand a year on operating costs.
Welcome to the 21st Century.
indefatigablefrog
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July 10, 2016 at 6:38 am
I have three carbon conversion units in my house and fossil fuel free transportation.
However, my guess is that most people would not be able to supply the fuel for any of these units at the small price I pay for this rather efficient process. 😉
Carbon Conversion Units:
Fossil Fuel Free Transport:
https://www.dropbox.com/s/lx2f41bgpootsi3/No%20fossil%20fuel%20-%201.m4v?dl=0
oops – forgot to leave a space between links. Carbon Conversion Unit 1:
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😉