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Cap&Trade - A Train Wreck
What to do with carbon based emissions? I have no clue. I’m not sure
Congress does either. They will be more confused than ever after reading
a recent CBO report on the topic.
In theory, the Cap&Trade approach is simple. A market will be
formed. There are two classes of participants. Those that produce carbon
based emissions, and those that don’t. The government will intervene
and provide a floor price (a cost to produce carbon based energy). The
government will also provide a ceiling (to insure that the cost of this
is not too expensive). Finally, the government will provide “allowances”
to certain green participants. Those allowances can be sold for cash in
the ‘market’.
Wait a second. Hold on. There is nothing close to being
‘simple’ about this. The government is going to be on the buy-side and
on the sell-side at the same time and they are going to be handing out
allowances that are worth money? What the hell kind of plan is that? It
gets better. Consider the following slide from the CBO on the
theoretical size of the Cap and Trade market:
Note that the estimate for the buy side of Cap and Trade is between 70-80b. A very big number.
It is 6Xs the wheat market. It is a bit smaller than Nat Gas. It is
equal to the combined soybean and corn turnover. It is 60% of the action
in the 30-year bond.
Wheat, corn, gas and the long bond are MONSTER markets. There are 100rds
of thousands of participants. There is billions of equity money behind
these markets. Under most conditions they are highly efficient. They
allow for a high degree of price discovery. Most importantly, the
efficiency of these markets is dependent on an extremely high usage of
derivatives. Note that the corn/soy primary market of $80b produces a
combined exchange traded and OTC derivatives total of $10 Trillion.
Based on the CBO data the ratio of primary to derivatives is 125 to 1.
The CBO looks at this and correctly concludes that a market this big has it’s own systemic risks:
For
example, a rapid increase in allowance prices could raise electricity
prices, which would harm U.S. businesses that rely on electricity. The
risk of cascading disruptions from the market for a single asset, such
as allowances, to other markets and possibly the entire U.S. economy is
called systemic risk.
So to address the systemic risks what are the suggestions?
Prohibition on Traders
BK: Dumb idea. Without traders there is no liquidity and then it becomes
a government bucket shop. The worry is that there will be some sharpies
in Chicago who make a killing off of this. But without the sharpies
there is no market.
Circuit Breakers
BK: That there is a perceived need for this when the government is going
to be on both sides of the market to begin with just shows how worried
these folks are.
Prohibition on Derivatives
BK: Dumb idea. There will be no market without derivatives. Can’t and won’t happen.
Reliance on Centralized Clearing
BK: Anything that can be traded on an exchange can also be traded
“upstairs” or “on the curb”. It merely requires a buyer and a seller and
a willingness to settle up based on a future date price. Markets don’t
work the way the CBO thinks.
Increased Regulation of Over-the-Counter Trading
BK: Accepting that Centralized Clearing is not possible; they propose new regulations. That has never worked.
Position Limits
BK: What limits? Who sets them? Does EXXON have a bigger limit than
Goldman Sachs? Limits don’t work. Want an example? Just look at JPM and
silver.
I am quite certain that the CBO believes that A) Cap and Trade is coming and B)
that it will result in a very big market in a relatively short period
of time. I draw that conclusion in part from the cover page of their
report. They actually believe that the guys in the yellow coats are
trading futures on “Allowances”.
The CBO provides a description of who might play in this sandbox:
Energy producers and other covered entities that would have to comply with the cap on emissions;Great! Another profit opportunity for Exxon.
Entities that would receive allowances from the government but would not be subject to the cap;Just who would get these allowances?
Businesses and individuals—mainly banks and investors, as well as companies that use emissions-intensive goods and services—that would trade allowances and related financial products with the first two types of participants and with each other.Just one big happy family of traders and crooks.
Washington
has no idea how markets work. They have some Utopian notion that
markets can work efficiently without the bad apples like speculators and
ugly things like derivatives. That they don’t understand this makes it a
certainty that C&T will end badly.
-The government will lose money supporting a bastard market.
-The probability of a Goldilocks outcome is small. The extremes of
either, (i) nothing is accomplished with emissions (supports too low) or
(ii) too high a cost is established and the economy tanks, are just as
probable as a favorable outcome.
-The only winners will be the banks, hedge funds, exchanges, specs, arbs and the derivative players. (AKA “Greater Wall Street”)
I don’t think there was ever much support for cap and trade. The last
election probably killed it. But anyone still standing that thinks this
is a good idea should read the CBO report. The table of contents tells
it all:
Note: I have a number of articles of late based on reports
from the CBO. Now another. Sorry if I am beating this horse to death.
They just keep dishing up stuff that I think is worth noticing.
»
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You're being introduced to a post-democracy existence. Just think, you're grandchildren won't have to bear the pain of remembering when you had the option to vote, despite whether or not that even meant anything to begin with.
This has been beyond farce from day one. I mean, listen to this: the next Big Idea from the folks who brought you the centrally planned mortgage market (hey-hey throw a TARP over that, look over here now!) is to securitize the fucking air and facilitate it's trading with derivitives !! Ta-daaaaa...
What could possibly go wrong?
It's even worse than that. Franklin EZ Credit Raines, the political hack who pushed Fannie Mae into a death spiral while CEO has <wait for it....> "invented" and patented a system (and partnered with GS *surprise*) for these carbon credits to trade through and all order flow would go through his toll booth (it would have to you see because he invented matching buyers and sellers). http://biggovernment.com/jbambenek/2010/05/28/insider-patenting-how-fann...
So let's review this plan: The government will demand rent on something everybody uses and then force everyone to transact with politically connected gatekeepers.
It just doesn't seem very accurate to put "capitalism" after the word "crony" here. More like plain old crony racketeering.
classic rentier feudalism.
Feudalism is a popular model. In it now. Look at the tax structure. Have to work to get the taxes to maintain any asset because of taxes. If a serf does not pay taxes to his/her lord the lord will push them off the land and imprison them. There is a class of tax feeders who need not pay, but they by definition can own no assets and live by the will and pleasure of the lord.
It gets better. Do some research on how carbon output is calculated. I wrote a paper on this and it's INSANE. It requires an insane amount of accounting and data management for each product and service and can change at a moment's notice. Also there is a massive incentive to misreport so regulation will be difficult. Especially since US regulators will be captured by big business in about .3 nan seconds. Game theory says everyone will cheat, and the regulators will only regulate the minor players.
The whole system is fraud made manifest. Even better a lot of Greenies even acknowledge cap and trade will do nothing for the environment. It's a wealth transfer to the wealthy.
Everyone will cheat? And that makes the market different from any of the other markets HOW????
No accountability is possible. At least with financial scams companies will go bankrupt, without government intervention of course. Now cheating in the carbon market is perfect. After all there is no label as to where the carbon came from. At least with toxic financial instruments they will eventually go boom and do some damage, and unless records are "lost" can be tracked down. Here it is fraud that can have 0 downside and is totally obfuscated from the public. Since next to no one will bother reading up on the carbon emission measurement systems much less measurements as to specific products from companies. The regulatory body over this will make the SEC look like avenging angels in comparison.
BK, this is such an important issue that needs "beating". Thanks for the time.
Wholly agree....
Modest carbon tax offset by a payroll tax cut is the rational answer.
Cut out the money grubbing middleman and the carbon credit scam artists
Whether you agree with the idea of man-made global warming or not... this simple truth tells you everything you need to know about who/what is behind cap and trade. If the end goal was actually about reducing carbon emissions, a straight tax would be the easiest and most direct route. IMO, it is abundantly clear to anyone willing (and able) to think rationally for just a moment, that cap and trade is not about the environment. It is then up to you to decide what it is about (again... having nothing to do with one's own belief regarding man-made global warming).
right, tax would be much better than another derivative.
it seems like it would be much easier to leave global warming out of the whole discussion. simply viewing the pollution created as a reason to tax carbon based fuels seems like something more people could get on board with. it would be a cleaner discussion atleast.
Man made global warming is a scam.
Junk away zealots.
+1
Agreed. The hue and cry of "global warming" quietly changes to "climate change." Why? To hedge the bet. Cap & trade is one more way for big government and the banksters to pick money out of everyone's pocket. Scam indeed! Continue junking.
It is fucking freezing in NY today. If global warming was real....I would be begging for some right about now.
IT IS THE BIGGEST SCAM EVER PERPETRATED ON THE ENTIRE WORLD.
I COULD NOT GIVE A SHIT IF YOU JUNK THIS....Sometimes the truth just hurts. Getting junked don't!!!!
Climate is not the same as weather, moron.
me too
PS: going to buy snow chains tomorrow, as a christmas gift for my car!
Minnesotans For Global Warming Song (If We Had Some Global Warming)
http://www.youtube.com/watch?v=qJUFTm6cJXM
There you go. Those glaciers must have simply left for Mars. A single coal fired power plant puts over 800,000 tons of CO2 into the atmosphere every year and there are thousands of them around the world. Yeah, there probably won't be any harm done. Do me a favor and try shitting in your own bed before you lay down for a nap.
Let me guess, you have a newly minted degree from Liberty college. That's right, dinosaurs are only 6,000 years old, the world is flat, and the earth is still the center of the universe.
Talk about a "zealot". People like this certainly make it easy to trade against those who lose money.
Laws of Physics
Lets assume your 800,000 tons per year per coal plant is correct.
Now, tell me how much was put into the atmosphere when Mt. St. Helens erupted.
How much when Iceland's volcano erupted twice this year? Or any of the other eruptions throughout history. Your coal fired power plants are a drop in the bucket.
After you've made that comparison, answer the following: What greenhouse gas traps heat 23x more efficiently than CO2? Don't even bother looking it up, the answer is Methane.
Now, how much of total global methane output comes from Plants and Algae? Answer is 60 million+ metric tons per year (verify from scientific american article http://www.pages.pomona.edu/~cjt04747/chem106ps/Scientific%20American%20Feb%202007.pdf). That's 60,000,000/800000*23=1725 of your coal fired plants across the globe. Are there even that many power plants, or are ACTUAL plants a bigger contributor to global warming?
You probably aren't even aware that the CO2 equivalent of greenhouse gases produced just from making flat screen TV's (NF3-nitrogen triflouride)dwarfs the output from your coal fired power plants because it has 17,000 times the heat trapping capability of CO2 (verify with scientific american again http://www.scientificamerican.com/article.cfm?id=electronics-industry-contributes-new-greenhouse-gas)
You dumbasses took the CFC's out of aerosol cans so you could close the hole in the ozone. And it is closing. But you're too fucking ignorant to consider unintended consequences, and as a result of the shrinking ozone hole over the Antartic ice, the sun's rays which used to bounce harmlessly off the bright snow and ice and back into space are now being trapped, causing the melt rate to INCREASE.
So fuck you and all you CO2 harping morons. You don't even look at the proper sources for stopping your "global warming" religion. You spout all your bullshit and never back it up with RELEVANT facts. Sure we are polluting, but in the grand scheme of things, our CO2 pollution isn't SHIT of a driving factor for climate change.
Do some reading or take a science class. If you want to champion something, at least know what the fuck you're talking about.
God damned fucking uninformed environmental wingnut fuckstick fascist bitches.
God damned fucking uninformed environmental wingnut fuckstick fascist bitches, bitchez!
Lawsofphysics research 'global geo engineering' then get back to me.
800,000 tons of co2 compared to what exactly? 800,000 is a big number, and it sounds scary on internet chat boards until you realize that The total mean mass of the atmosphere is 5.1480 × 10^18 tonnes, which is about 5 quadrillion tonnes. So, what does it mean?
You are repeating many of the emotional trigger phrases that are supposed to tip people off as to what the 'correct' position in the argument is. It is a dirty tactic, but I can't say I've never done it. The fact is you're not thinking, you're replaying and repeating the thoughts of others.
You really don't know about global warming. None of us do. We see that the earth looks like it might be on a warming trend, but we don't know if we're causing it, we don't know if we could even do anything to stop or change it if we were, and we can't guarantee that if we did take action, that it would be the right action. There are so many unknowns that it is impossible to conclude anything, save for maybe that Cap n' Trade is about the worst thing we could do.
When you see the taking heads get up on TV and say the 'science is settled', it betrays their incompetence. Science is a description of the natural world that is constantly being revised and improved. Science, by it's very nature, is never settled. Anyone who tells you otherwise doesn't know or is selling something. Know that bitches!
One thing to keep in mind is that originally there was no oxygen on the planet. All the oxygen was created by early lifeforms. I bring this up just to show how life can change its environment - in fact all life does, some to such a point that they can no longer survive in the changed environment (think yeast in a wine vat). Just in case you think that we're incapable of making these changes, think about the effects 7 billion people can have on their environment if algae changed the atmosphere to such a point it could support animal life.
I tend to believe in AGW because 1) 97% of the climate scientists believe it - I do tend to listen to the experts in science (not in much else but science has more checks), 2) Because the concept is sound - co2 and other molecules can cause a warming effect and we're releasing carbon into the air that had been taken out of the atmosphere during warmer periods of earth history, and 3) I've analyzed some data myself and saw an unmistakable warming trend (should mean nothing to you, but it does to me).
Yes, one of the great things about science is that when new evidence is acquired, theories are changed or discarded based on new contrary evidence. We make the best theories based on the available evidence and the evidence is now in favor of AGW and the AGW theory is supported by the majority of experts. There has been no peer-reviewed, non-cherry picked evidence that contradicts the AGW theory (at least that I've seen - I have seen some really bad attempts at it though). There are natural cycles and it's difficult to say exactly how much of any climate change is due to human influences but our best efforts say there is a warming trend and some of our activities are contributing to the changes. I think there is enough to say we should try to do what we can.
That said, Cap and Trade is about the worst idea out there and would wind up being only another way to transfer wealth to the already wealthy.
"co2 and other molecules can cause a warming effect"
Explain this.
Shouldn't the energy emitted in the form of heat by a particle of CO2 or any other gas be equal to the energy input? Doesn't energy escape the earth system into space in the form of heat/electromagnetic radiation?
You say that like 97% of scientists agree on AGW. Where did you get that figure? Is it a real number? How many of them deal primarily with the climate in their work (b/c it may be confusing to speak with a chemist about climate science)?
The thing that is missing for me is the direct causal relationships. They aren't there. Sure "experts agree" and "data suggests" are wonderful phrases to toss around, but at the end of the day there is no clear connection that I see between human activity and any sort of climate change, and Shakespeare himself musing on the subject won't change that fact. Perhaps there are correlative data points, but as we all know, correlation is not causation.
That is not to even mention the fact that much of the data on climate science is based in computer models. With any computer program, garbage in equals garbage out.
You have to consider the vastness of the entire system. There are so many variables at play that I don't really believe scientists when they claim that they have this issue nailed down.
So, to address your points:
1) Scientific group-think should be regarded as dubiously as civilian group-think; scientific progress will not be achieved this way
2) there is no evidence to suggest that past temperatures have anything to do with current climate trends
3) your experiment may as well not have happened if the only thing you're going to share with us about it is that 'you did one'. Release your results, and tell us how you collected the raw data and the method you used to analyze it. Then we can talk about it's legitimacy.
I see a clear agenda behind the 'science' of global warming. This discredits the entire field of inquiry. This is so because when you realize the agenda exists, you also realise that they are not posing a question and looking for answer as a scientist should, but rather they are seeking evidence to support a predetermined point of view. It is a shame, really. I love science, I really do, and always have. I have seen every episode of Bill Nye's television show. I hate to see the large blemish on the face of science created through the political machinations of a few bastards.
The 97% figure is from a Proceedings of the National Academy of Sciences peer-reviewed study. It shows the more expertise one has, the more likely one believes in AGW. It goes up to like 99.7% for climate sciences that have published in journals within the last 5 years.
1) Any scientist is capable of doing studies to disprove a theory and if they have solid reproducable results, the consensus will change - this is the great thing about science. But none have been able to do so yet.
2) There should be some relationship between past conditions and their effects on weather and those of today. There may be more factors but that doesn't invalidate the relationships between concentrations of gases in the atmosphere and climate.
3) I said this should mean nothing to you. When I was moving to MN, to get an idea of what to expect as far as weather goes I did my own analysis. I just used publicly available weather data from the last 150 years and looked at basic statistics (mean, std, q1q3, minmax, etc.) of high temp, low temp and snow by month and decade. Again, this was for my own information and why I believe what I do. Try a similar analysis yourself - especially at northern locations.
The agenda with AGW is only from the corporations that pollute our world. This has been around a long time and most of that time it was the scientists trying to convince the politicians that this was a concern with pollution industry trying to block any changes for their own financial gain. That's the agenda. The scientists with no political agenda trying to make a positive change is where this all started.
Direct causal relationship? Here's a basic explaination:
"Most of the light energy from the sun is emitted in wavelengths shorter than 4,000 nanometers (.000004 meters). The heat energy released from the earth, however, is released in wavelengths longer than 4,000 nanometers. Carbon dioxide doesn't absorb the energy from the sun, but it does absorb some of the heat energy released from the earth. When a molecule of carbon dioxide absorbs heat energy, it goes into an excited unstable state. It can become stable again by releasing the energy it absorbed. Some of the released energy will go back to the earth and some will go out into space.
So in effect, carbon dioxide lets the light energy in, but doesn't let all of the heat energy out, similar to a greenhouse"
Nice post. Well stated.
the entire solar system is warming.
Also, what happened to the glaciers from the ice age? Neandarthal SUVs?
CO2 is not the cause of warming, it is correlated to it. Learn your effing science
Wow, trav turned his X-box off long enough to reply. After your mother makes your lunch you can show me the data. Who said CO2 was the sole cause of warming? I certainly didn't. CO2 is rising (along with other gases).
You implied it.
Probably because the masters of your religion told you you must.
Zealot.
http://www.iceagenow.com/Growing_Glaciers.htm
So, the glaciers haven't left for Mars.
http://climaterealists.com/index.php?id=1742
http://www.skepticalscience.com/Is-the-airborne-fraction-of-anthropogeni...
And human generated C02 doesn't seem to stay in the atmosphere.
Your final argument is pure ad hominem, without knowing anything about the hominem in question.
Talk about a zealot. I suppose you got your science degree from Julliard?
And how exactly would you trade against a climate skeptic? Chinese Solars? Is that a trade on the science and engineering, or more on the politics and subsidies?
Global warming is an admitted scam to drive global government. And like all big scams, there's a lot of money to be made betting with the scam, until it fails. Even the folks who know it's a scam know that.
Did you even read Knorr's paper? Don't just read the website that has taken his findings out of context. His paper confirms substantial CO2 increases post industrialization. Just because the increase in CO2 output from man was even greater, the religious right spins this on a web site. Are you kidding me? There is something called the carbon cycle you retard. Yes, this cycle will increase and soak up some of the increase in man's CO2 production, but the overall levels are still INCREASING. Read the actually paper moron, not just the website that cherry picked phrases and data to spin.
His paper confirms substantial CO2 increases post industrialization...
I swear, you need a doctorate just to find out if you're hungry these days. These appeals to authority are bullcrap. The assumption is that simply because one is not a full blown physicist with a doctorate, they are then completely incapable of rational thought or reason. Did you really expect another result other than an increase in CO2 as we burn carbon based fuels?
This is akin to saying there has been an increase in websites since the advent of the internet.
And without basic research in physics, computers and the internet would never have come to be. Don't ask questions, if you really don't want to know the answers.
I do agree, however, that government funding has gotten out of hand and what they are doing is misguided. Look, a private company solved the human genome. Anyone really surprised. This is why I left academics in california and started my own company. Industrial science has a very immediate goal that must be dealt with in a timely manner. "Academics" in science and economics need to be seriously downsized as it is pretty clear that the corruption in both fields runs deep.
rebuttal fail
The question I asked was rhetorical, so no, I didn't want an answer. I was trying to point out how obvious it should be to anyone with a rudimentary understanding of fire that combusting carbon based fuel matter would release CO2 as a byproduct.
I brought up the internet to make an analogy, but it was obviously lost on you judging by your response to it.
Case closed. Peer reviewed. Move on dipshits. Send more grant $$$. Thank you oil company for sponsoring my research. Wake the fuck up.
http://www.thedailybell.com/1595/Elites-Pathological-Dysfunction.html
Wow, look another sheeple who can post links to propaganda. Very entertaining.
But surely The Daily Bell is a reliable source? :)
None of what you cited is peer review. Some glaciers are growing, MORE are shrinking. cite some primary literature that has been peer-reviewed and I will consider your argument. Anyone can post crap on the internet.
"peer review" is elite speak for no challenge necessary. piss off.
exactly - if the funds roll in a new direction, then the peer magically accepts new ideas.. not the other way around
You have been co-opted and your statements are regurgitated. Climate-gate provides the window into the peer-review process as it relates to this topic. Why would people go to such lengths to quiet opposing views?
The science here is settled... just as it was when the sun revolved around the earth... it is heresy to believe otherwise.
Those who trashed the raw data, forever, should be jailed.
Beware of paid trolls here!!
And you surely believe the wikileaks affair is just a scam, but that the climate gate one was real. Check your bearings, you're having food poisoning from all the propaganda you're consuming.
hmmm... what is it that you think I believe? Why do you think I think that wikileaks is a scam?
What propaganda do you think I consume?
Ahh...
It's always fun poking at people who think increasing 0.039% of the Earth's atmosphere (that's right, CO2 makes up a whole 0.039% of the atmosphere!) to 0.04% can possibly have any measurable effect.
no doubt, absolute nonsense
I don't believe all skeptics fit your description, though I'm sure it is convenient for you to believe that they do.
A fact that is never mentioned in all of this is the fact that >20% of all the fossil fuels consumed in America is done so simply to produce fertilizer for crops and feed to give to our animal protein sources. I wish "organic" farming even registered, but it doesn't. There is a natural process of converting gaseous nitrogen to ammonia, but it is very slow. Hey, blame thermodynamics and physics, it take almost 500 kJ per mol of energy to simply break the nitrogen-nitrogen bond and a whole bunch more energy to reduce it to ammonia. To say this would cause food prices to skyrocket is an understatement.
Ah, yes Trade in Crap is the next Big Con !!
Actually, I think it is worse. It is, at its core, the basis to regulate living organisms (all animals produce CO2 no?). What happens when I not only have to have life insurance, but I also have to buy some CO2 credits to cover my emissions for a year ... or else ...
For those interested, this is a very interesting tv series that is long science and short political pandering.
http://www.abc.net.au/science/crude/
Cooter