Carbon-Market Concept Moves to Mainstream


Wall Street Journal – May 14, 2008

I really do not like the concept of trading in carbon. I think that carbon offsets trading only reward bad processes that are extremely cheap and are a band-aid to the real problem. If it is assumed that we need to vastly reduce the carbon footprint then the buying public should be encouraged to buy energy and products that result from lower carbon emissions and discouraged from buying the carbon rich ones.

Allowing a utility that has a coal burning plant in one part of the world to offset that footprint with a geo-thermal plant in another part of the world really doesn’t solve anything. If the two plants served the same marketplace, then their energy would compete but if the two plants are separated by oceans then we really haven’t solved any problems, we have just allowed a company to financially afford a carbon-rich coal plant.

Also, a carbon heavy industry should not be able to trade credits with a carbon light industry. Once again, this doesn’t solve any problems, it only makes it financially profitable to operate the carbon heavy industry.

There is a lot of trading that happens in the US. We trade stocks and commodities by the billions. But, in nearly all of these cases, these are market driven trades and markets. In the case of commodities, a cereal manufacturer in Michigan needs to control the costs of grain and so buys and sells these crops well in advance of their production. This allows the manufacturer to control costs and produce an end product that fits the budget range of the end customer. This is a very good thing, but understand it is the profit from the trading of that grain that allows the grain manufacturer to receive relatively expensive grain but at a cost averaged lower price. This technique cannot effectively be applied to the byproduct of energy production.

A carbon market is a false market. It is created at the behest of a government and therefore serves no need except to keep the government happy. It is also ripe for poor and maybe even criminal behavior.

It is my belief that carbon trading only allows carbon heavy industries to thrive. If the goal of the people is to reduce carbon output, then we should discourage them either by taxes or by incentives to better methods.

My other problem with carbon markets is that they pretend that the entire problem is based on carbon. There is plenty of science to assume that methane is a huge contributor as well but that production is getting a pass on this discussion.

I know that I have ranted a lot above. Here are some snippets from the Wall Street Journal article that prompted all of this.

Ten years ago, anyone advocating a national system of trading greenhouse-gas emission rights would have seemed like a zealot on the fringe, with no idea of what the American business community could tolerate.

Not only do Democratic presidential candidates Barack Obama and Hillary Clinton want to create a national market for permits to discharge greenhouse gases like carbon dioxide. So does John McCain, the likely Republican nominee.

Meanwhile, plenty of companies have refined or retooled their business models so they can profit from the emergence of a “green economy.” At The Wall Street Journal’s ECO:nomics conference in March, companies as diverse as Procter & Gamble and Duke Energy talked about ways they are positioning themselves as environmentally friendly.

Most proposals for a carbon market would set nationwide caps on carbon-dioxide emissions, which would be gradually reduced, year by year. Companies would get a fixed number of annual emission permits, based on their energy output.

For electric utilities that rely on relatively clean sources of power, a cap-and-trade system could be a bonanza, letting them raise money by selling unneeded permits. Calpine, which runs natural-gas-fired plants, told investors earlier this year its gross margins would improve if Congress passed greenhouse-gas legislation.

At Chevron, Andrew Mingst manages the oil giant’s carbon-market activity. The company trades regularly in the European carbon market and is seeking carbon-offset allowances through the United Nations for a geothermal project in Indonesia that generates clean energy.

You can read the entire article here.

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