Cap and trade is a farce

[Anonymous]

http://www.torontosun.com/2013/04/19/carbon-credit-farce-collapses--again">http://www.torontosun.com/2013/04/19/ca ... ses--again">http://www.torontosun.com/2013/04/19/carbon-credit-farce-collapses--again

Last Tuesday, April 16, the European carbon-trading market collapsed for the third time since it opened in 2005. This shows just how phony (and futile) are government schemes to cap-and-trade carbon emissions.

 

It is also very bad news for Premier Alison Redford's hope to raise Alberta's fee on such emissions from $15/tonne now to as high as $40/tonne (a figure her government insists it is not contemplating).

 

Europe's carbon exchange, the European Trading System (ETS), has been plagued from the start because it is and always has been a complete political charade.

 

Eager to win credit for being "green," European governments decided eight years ago to place limits on the amount of carbon dioxide individual countries and industries could emit each year. This is the "cap" in "cap-and-trade." Businesses that were likely to exceed their caps could then "trade" for (i.e. buy) more cap space from companies that had extra.

 

But the scheme collapsed almost immediately.

 

There is no natural market for carbon credits the way there is for cars, bananas or paperclips. To the extent there is any market at all, it is entirely because governments decree one should exist.

 

The trouble is governments are lousy at mimicking the role of markets. And they proved this in Europe in 2005 by giving out too many emission credits, initially. Most companies had more than enough credits, so they didn't need to buy more. This bureaucratic miscalculation drove prices way down.

 

The 2008 worldwide financial crisis is blamed for the second collapse. Yet it is just as likely that fraudulent trading was behind the second plummet. The peak price achieved by the ETS — about $30 a tonne — occurred in the early fall of 2008, just before the financial collapse.

 

But at just that time, Europol — the European police service — detected unusual spikes in prices on the ETS. Their investigation determined that nearly 90% of trades were fraudulent, attempts by organized criminals to scam governments out of about $7 billion in tax credits for going "green."

 

After the Europol investigation, the number of certified traders on the exchange went from 1,265 to fewer than 200 in a matter of weeks, as the scammers were delisted.

 

Governments hadn't detected this themselves because the whole idea that carbon trading is a way of saving the planet is a political false-front. Governments created the ETS to give the appearance of action to reduce greenhouse gas emissions, but so long as some businesses were buying credits and some selling (and governments were skimming their cut off the top), political leaders truly didn't care whether the trading was real or having any impact on the environment.

 

The third collapse came last week after European Parliament MPs voted not to remove nearly 800 million tonnes of credits from the exchange. There are still too many credits on offer. The price last Friday was around $4/tonne, not the $40 Alison Redford claims not to want to impose (but really does want to), nor even the $15 her government currently imposes.

 

And the European price is projected to fall to as low as $1 a tonne by the end of the year. How could it do otherwise? Without governments creating these markets, forcing companies to participate and setting phony prices, these markets would not exist. They are entirely artificial.

 

An American carbon exchange went out of business in 2010 when the price there fell to under 10¢ a tonne. The price on the Chicago Carbon Exchange was even lower than on the ETS because companies were not forced to participate.

 

Carbon trading is nothing more than an elaborate way to tax carbon use. It is a political scam and in no way helpful for the environment.