Do your part – Jan 4, 2009

0 Responses to Do your part – Jan 4, 2009

1. Jim says:

   January 5, 2009 at 10:33 am

   I would disagree the tone here. I think carbon credits should be part of the solution. The problem is they are not mandatory so demand is low so the prices are low so businesses don’t have to change their practices because the cost of purchasing credits isn’t enough to force change. They are just buying carbon credits cheaply and riding the green wave of positive publicity.

   My dad is a farmer and I have encouraged him to enroll his land to be able to trade carbon credits. Why not? You’ve been providing a service for years that businesses are just now warming to the idea of paying for. I don’t see a problem with big businesses cutting checks to farmers, who use the money to drive local economies in slowly depopulating rural areas. Money from agriculture trickles through the entire economy.

   Once carbon credits become mandatory you will find the price of a credit increasing to the point where it is profitable to fund all conceivable methods of sequestering carbon. As the cost of a credit increases businesses will find it is cheaper to reengineer their methods to pollute less.

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2. neal says:

   January 5, 2009 at 11:16 am

   As the cost of a credit increases businesses will find it is cheaper to reengineer their methods to pollute less.

   So what happens then to the farmers or other carbon-negative holders when their asset becomes worthless?

   I see it as a politically friendly situation that creates money from imaginary things. Simple carbon emission fees would accomplish the goals much more efficiently and directly without creating made-up value from concepts rather than things.

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3. Jim says:

   January 5, 2009 at 12:00 pm

   But carbon emission fees would go to the government and be priced at the will of K Street. I see problems with that. You would have companies lying about how much carbon they admit and government inspectors trying to keep them honest. (On second thought you will have those lying bastards misleading the public about their pollution levels no matter what system is in place).

   Best to keep government out of it as much as possible. It would be more fair if credits are traded publicly at market prices. For a typical farmer the revenue from selling these credits will only be a couple thousand dollars. Enough for a new truck or a down payment on some equipment, but not enough to break them if its taken away. Unexpected spending money injected right into the economy… like that $20 bill you find on the floor at a bar.

   When the credits lose value as you point out, it will hopefully be because technology and infrastructure have advanced to the point where these offending businesses aren’t polluting as much. That’s the desired result of the system, that’s a good thing!

   And its not a new concept. Europe’s been doing it for years. The price of a carbon credit there was quadruple that of here as of last July (the last time I checked). It’s better to work with our friends across the pond than sit here an do nothing.

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4. neal says:

   January 5, 2009 at 1:02 pm

   If anything would be a justifiable scenario for government involvement, I would say stopping our economy from killing our environment would qualify.

   The ‘market’ would be determining the price of a product that doesn’t exist, which has a defined supply because of what the government decided the supply was. I would think that the recent situation in the finance industry would show the folly in building wealth on the trading of imaginary things in a market that is regulated by those who would profit from it.

   When the credits lose value as you point out, it will hopefully be because technology and infrastructure have advanced to the point where these offending businesses aren’t polluting as much. That’s the desired result of the system, that’s a good thing!

   You could achieve the same end result with an emissions tax. If your concern with a tax is companies lying about their emissions, I don’t see how CAT gets around that. If they’re going to lie about their emissions to avoid an emissions tax, why would they not lie about their emissions to get around having to buy credits? If you trust the government to set the supply based on emissions goals, why not trust the government to set (and adjust) a tax accordingly?

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5. Jim says:

   January 5, 2009 at 3:32 pm

   Carbon credits are not a non-existent product, they are contracts for a very real service.

   But government involvement should be limited to setting and then gradually reducing the cap on emissions and maybe verifying the legitimacy of offset projects… which can be varied as planting trees, no-till farmland, rangeland and grassland, capture systems in landfills and livestock operations, basically any project that gets carbon out of the atmosphere. Hell companies could even get carbon credits for updating their building to be more energy efficient and sell the credit to help pay for the project.

   The government, with all the vast tracks of forests and parks it owns, would actually be a major provider of carbon credits.

   On the lying factor… sadly I agree that is just human nature and there’s probably nothing that can be done to prevent that. Either system would require government inspectors and oversight.

   But with a carbon trading scheme would foster more innovation in the private sector to find ways to pollute less and capture carbon. A whole industry could erupt of businesses using enzymes or some other scientific magic to break down carbon and sell the credits.

   After the last eight years, I’m sure I can be forgiven for being a little wary of trusting the government. If the results are the same, why have the government collect the money as a tax instead of having the money make the rounds in the free market?

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6. neal says:

   January 5, 2009 at 3:55 pm

   I guess I just see the real product behind carbon credits differently than you. I don’t dispute the transaction or the contracts or the reality of the exchange. But the entities themselves have been arbitrarily created. The market only has the power to decide the price because of the regulation of the existence and quantity.

   I also have less faith in the long-term benefits of creating an economy of credits. You’ve said yourself the goal would be to render them irrelevant. So to create so much industry on the basis of being able to sell credits seems short-sighted when their sustenance is dependent on the continued creation of new credits and the credits’ value, isn’t it? The tax from emissions could go toward encouraging the same type of investment as part of a greater energy policy.

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7. Jim says:

   January 5, 2009 at 4:27 pm

   They’re not arbitrarily created. A guy from, let’s say, Lincoln’s SunOne Solutions, comes out to your farm to verify your farming practices and does the math to figure out how much carbon the plants on your property clean out of the air each year. That’s a real number that corresponds to a certain amount of carbon credits that can be sold on the Chicago Climate Exchange.

   With it being a voluntary system at present, only companies who want to present an environmentally friendly image purchase these credits to say their products are carbon neutral. You’re spot on here, though. Nobody has done anything differently than normal and they all pretend they’re saving the world.

   But now imagine that the CAT is mandatory. The earth can only capture a finite level of carbon, evidenced by the global warming crisis and the surge in carbon in the atmosphere. So, depending on where the initial cap is set, the prices of these credits will soar to the point where it is cheaper for companies to change their practices to pollute less and stay under their government pollution allowance.

   This is a system where OPPD can earn carbon credits by building a wind farm to offset emissions from expanding coal plants. They can sell these credits to make the project financially feasible. Here they used the credit system to build sustainable infrastructure. Other companies will follow suit because it is in their interests to spend their money developing their own infrastructure opposed to throwing the money away on carbon credits.

   And then the government ratchets down the cap after a generation of innovation. Setting the bar higher for our industries. Yadda yadda yadda, we have fusion power and cars that run on feelings of self satisfaction!

   If the government was taxing emissions, the money would only fuel the bureaucracy and I do not trust it would trickle down to the renewable industries through grants nearly as quickly. Plus you have the possibility of corruption and favors and giving politicians more power. The government would be a major player by setting caps.

   Of course it wouldn’t work well unless China was doing it too. That’s a major flaw in the system. But the world is looking to us to be leaders in fighting global warming. Mandatory cap and trade would be a good step in that direction, but far from the solution to all our woes. And in the process a few Nebraskan farmers get some new tractors. Sounds good to me!

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8. neal says:

   January 5, 2009 at 6:02 pm

   The “arbitrary” comment, while not the right word, was in relation to the artificial imposition of what the desired quantity of carbon is, which again, can more quickly and easily be achieved via an emissions tax. Following your example, OPPD could still build a windfarm to offset their overall emissions and thus pay less without having to enter something like the CCE.

   I’m also just kind of puzzled by your fear that government-based emissions regulation would be riddled with corruption and favors, yet you seem to assume that the market would be full of fairplay altruists, even though the market and its corresponding requirements would be subject to government regulation. Do you think there wouldn’t still be all kinds of exemptions and loopholes in a CAT system?

   Is it our respective distrust of the humans involved in implementing these systems that is getting in the way?

   EDIT: I realize it’s entirely possible that this is an illogical connection, but I just keep thinking about the finance industry, in which paper that definitely represented real things, in the sense that they were explainable things, was bought and sold and bundled and leveraged based on an artificially inflated value that didn’t so much represent a market-determined value as a value that those who depended upon the market needed it to reach.

   Obviously this is getting pretty far from the scenario in the cartoon, but I’m trying to explain my market neurosis.

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