Well, the Republicans may have only half-heartedly raised their hands when asked if they believe global warming is a problem. Doesn’t matter. We’ll get along fine without them. Here’s a good step:
A comprehensive range of environmental futures and options are expected to begin trading during the first quarter of 2008 on the New York Mercantile Exchange (NYMEX), said the exchange on Wednesday. […]
“The Green Exchange expects to focus on both global and regional compliance trading while also building liquidity and demand for the highest quality voluntary standards in the market. Underlying all this will be the ability for all market participants to manage risk and take positions in environmental derivatives markets,” [NYMEX Chairman Richard Schaeffer] added.
I’ll be the first to admit I don’t know how all this stuff works. Maybe someone can explain it more thoroughly in the comments. My understanding: Company A doesn’t pollute, so it has a bunch of carbon credits to trade. Company B is polluting beyond its limit, and needs to buy credits. Company A sells credits to Company B.
If that’s the way it works, then I can see tremendous benefits. Company A is already “going green,” while Company B is spending tons of cash to buy credits. That, in my books, is a good reason to start cleaning up. One question though: Who sets the limits? If the Republicans don’t believe we’re causing global climate change, then I certainly don’t trust them to do it.
Jen
Original Lee
http://www.epa.gov/airmarkets/trading/basics.html
My browser is only allowing cut-and-paste today, sorry.
EPA sets the allowances for each major pollutant by SIC sector. IIRC, these emissions limits are part of the facility operating permits. (It’s been a while, so I might be wrong.) So if you’ve made some upgrades and changes, and can prove you are emitting less than allowed under your permit, you get emissions credits, which in the past could only be banked against some future use. Nowadays you are allowed to sell your credits to somebody else through an official exchange. In an ideal world, the EPA would gradually decrease your allowance each time you renewed the permit for your facility, so that the total emissions nationwide would be reduced in a market-friendly way, but I’m not sure this has been happening.
Jen
I’m not really sure why you wouldn’t trust Republicans on the environment, I found this important resource through their blogs…
Why do Republicans hate my kids, is what I want to know.
Michael D.
Jenn: These days, I don’t trust Republicans IN the environment, let alone ON the environment.
Zifnab
First the Fair Tax, then Giant Death Asteroids, and now “Global Warming”? Ugh. Micheal can’t go a minute without spouting off some nutty idea or wacko philosophy.
Get with the times, Michael! Global Warming is a Myth perpetuated by Yuppies Overseeing Unimportant Resources and Myiering Operational Manufacturing. It’s all one giant scam and you would know better if you weren’t always wrong all the time.
Chris
Jesus, I used to work for a trader at the NYMEX. By now he’d have me trying to code something in Excel and some third-rate fourth-party software so he could think he had an advantage in the market.
Glad I’m not there.
The Other Steve
I think it would work better if each company were giving a limit of the number of credits they could have, but you still had to purchase those credits.
Let’s say you get a limit of 50. Each credit is 25,000/year. You only need 40, so that’s what you buy.
A company who needs 60, however, and has a limit of 50, has to pay say 75,000/year for each extra credit beyond 50.
The problem you get into by giving credits to companies, is that it creates this bizarre market and huge windfalls for some companies which impacts the competitive market.
With the government managing the excess, it creates an incentive for companies to reduce, but it doesn’t have as dramatic of a shift from one company to another. That is, the one company in my example saves the 10*25k… rather than gaining the 10*75k in profits for doing virtually nothing.
As I understand it, this is the lesson Europe learned. Giving the credits away is bad.
PK
My question is what do you trust the Repulicans on? Anything? One single thing? What are these people good for?
The Other Steve
What we need to do is write the third-rate fourth-party software and sell it to the traders.
That’s how you make the money!
Whose in with me?
The Other Steve
Identifying public restrooms where you can find some privacy.
Chris
Meh. That’s what I do now, except I do it in-house and get paid up front for it.
And I get fruit!
jrg
My understanding of Carbon Trading is that it creates a more “efficient market” for getting down CO2 emissions.
Since CO2 is a global problem, and it does not matter if the CO2 is emitted from a coal powered plant in Boston or Botswana, it allows the plant owners in Boston to pay for efficiency gains in the Botswana plant, because there is more “low-hanging fruit” in the Botswana plant, thus allowing the Boston plant owner’s dollar to go further than it would if that dollar were to go towards improvement to the Boston power plant.
Therefore, when the plant owners in Boston are required to reduce emissions by X%, they can meet this number with less cash by financing improvement in the Botswana plant.
Haltelcere
The catch? Getting the EPA to actually enforce the environmental rules and laws it is supposed to.
The Other Steve
And the wonderful thing. The people in Boston will pay some guy in Botswana not to expand his power plant.
The guy in Botswana will profit, and he doesn’t give a rats ass about the people without power, because, hell, it’s Botswana and nobody cares.
What do you think the permit process is for a competitor to build a new power plant in Botswana? Well, the other guy hs bribed the govt, so they won’t give out a new permit.
It’s a wonderful way to profit.
So who wants to help me not build a power plant in Botswana?
crack
TOS:
Obama’s plan is to auction the credits off. In Europe they are having problems because the credits are so valuable people start companies just to get the credits and sell them.
jcricket
I just read that if we really want to help the environment and spur R&D/innovation we should encourage… wait for it… wait for it… more regulation!
No, seriously. Look at the graph!
J sub D
That sure sounds like a good way to ensure that a startup company can’t compete. They weren’t given credits because they didn’t exist when the credits are handed out.
A more fair way, that doesn’t favor established entities, would be to auction off the permits annually. Obama’s right on this one.
Mike
Interesting article. I hate to be the odd man out here, but are we not missing the bigger picture? Seems to me that this concept of credits for polluters has already backfired. In a sense, we are now allowing companies to buy their way out of reducing their emissions. How does that make sense? I know that some would say this is just a temporary solution but we all know that when corporate America finds a loophole, it will exploit it for as long as it possibly can. Then again, perhaps I’m just too radical in thinking that business should strive to reduce the emissions for the good of mankind (and their own long-term existence).
MNPundit
Al Gore.
An edition of simple answers to simple questions.
BIRDZILLA
And thats what its all about a big time tax on all of us and all controled by sinister groups like the CFR and evil men like AL GORE this whole global warming is a big fat lie and look at all those hypotcrits in BALI comming in their private jets and gas guzzling limos and all lead by AL GORE and his junk science movie