Creating the Carbon-Credit Bubble

[BigRob]

Can someone explain to me how the creation of a carbon-credit market actually creates anything other than paper wealth? (i.e. a government created bubble that will inevitably crash under its own weight)

 

[top gun]

Can someone explain to me how the creation of a carbon-credit market actually creates anything other than paper wealth? (i.e. a government created bubble that will inevitably crash under its own weight)

First we have to understand the true purpose.

The purpose is to put some incentive on businesses by forcing a choice. They can invest in anti-pollution energy saving practices & methods or they can basically not do that and pay a penalty.

It's somewhat like CAFE standards on automobiles except with CAFE you have no choice. You must produce ONLY vehicles that get a certain mileage or above or you can't sell them at all.

Cap & Trade is a very complex issue that confuses a lot of people. The mindset behind it is that if we don't speed up our move toward more efficiency and less pollution we won't have the technology in place in time to operate transportation and businesses without things like oil, our electric grid will not be able to handle the load and the pollution problem will worsen to very extremely serious levels.

Energy & pollution are both things that there use & creation do not just effect the person using them or creating them.

Just some & not everyone conserving energy is like having gasoline rationing for most because it's in short supply while at the same time allowing some to use all they want.

And pollution is very similar to second hand cigarette smoke. If a company could pollute just on their premises and not effect others negatively that would be one thing. But it doesn't work that way. Pollution in the soil effects everyone's ground water the wind blows pollution everywhere and greenhouse gases effect everyone on the planet as well.

So he goal isn't for the government to make money on Cap & Trade... it's to help conserve energy and lessen pollution & greenhouse gases.

 

[BigRob]

First we have to understand the true purpose.

The purpose is to put some incentive on businesses by forcing a choice. They can invest in anti-pollution energy saving practices & methods or they can basically not do that and pay a penalty.

It's somewhat like CAFE standards on automobiles except with CAFE you have no choice. You must produce ONLY vehicles that get a certain mileage or above or you can't sell them at all.

Cap & Trade is a very complex issue that confuses a lot of people. The mindset behind it is that if we don't speed up our move toward more efficiency and less pollution we won't have the technology in place in time to operate transportation and businesses without things like oil, our electric grid will not be able to handle the load and the pollution problem will worsen to very extremely serious levels.

Energy & pollution are both things that there use & creation do not just effect the person using them or creating them.

Just some & not everyone conserving energy is like having gasoline rationing for most because it's in short supply while at the same time allowing some to use all they want.

And pollution is very similar to second hand cigarette smoke. If a company could pollute just on their premises and not effect others negatively that would be one thing. But it doesn't work that way. Pollution in the soil effects everyone's ground water the wind blows pollution everywhere and greenhouse gases effect everyone on the planet as well.

So he goal isn't for the government to make money on Cap & Trade... it's to help conserve energy and lessen pollution & greenhouse gases.

So basically what you are saying is that there is nothing created other than paper wealth? So, mandating that people act in a certain manner to create an artificial economic bubble is the goal? That is a terrible idea.

The government might not make money off the deal, but the private sector is going to have a whole market for "carbon credits" that is essential backed by nothing. Therefore, creating wealth from nothing in the form of this bubble that will explode, hurting us all again.

 

[top gun]

So basically what you are saying is that there is nothing created other than paper wealth? So, mandating that people act in a certain manner to create an artificial economic bubble is the goal? That is a terrible idea.

The government might not make money off the deal, but the private sector is going to have a whole market for "carbon credits" that is essential backed by nothing. Therefore, creating wealth from nothing in the form of this bubble that will explode, hurting us all again.

I have zero idea where you're getting the "paper wealth" or "bubble" thing from. Wealth of any kind + or - is not the purpose of the Bill.

That's like saying we should still build all our cars to get 8mpg highway and run on leaded gas because forcing companies not to is only creating "paper wealth" and is being mean to business.

No... no it's not. It's looking forward and helping to eliminate catastrophic shortages & problems for all people down the road.

 

[BigRob]

I have zero idea where you're getting the "paper wealth" or "bubble" thing from. Wealth of any kind + or - is not the purpose of the Bill.

That's like saying we should still build all our cars to get 8mpg highway and run on leaded gas because forcing companies not to is only creating "paper wealth" and is being mean to business.

No... no it's not. It's looking forward and helping to eliminate catastrophic shortages & problems for all people down the road.

Do you deny that the existence of a carbon credit exchange will be created from this bill?

If you accept that, then what are those carbon credits based on exactly? There is no tangible asset behind them that gives them any real value, outside of the government making it so by penalizing companies for "polluting."

That is simply the creation of another "bubble" from nothing, which will inevitably explode, hurting us all yet again.

Green technology can come about, but it needs to come about due to market circumstances, not a government manipulation of the market. We all saw how that worked out with the housing crisis and the sub-prime debacle.

 

[AtheismIsReality]

Do you deny that the existence of a carbon credit exchange will be created from this bill?

If you accept that, then what are those carbon credits based on exactly? There is no tangible asset behind them that gives them any real value, outside of the government making it so by penalizing companies for "polluting."

That is simply the creation of another "bubble" from nothing, which will inevitably explode, hurting us all yet again.

Green technology can come about, but it needs to come about due to market circumstances, not a government manipulation of the market. We all saw how that worked out with the housing crisis and the sub-prime debacle.

Why is a bubble going to develop out of it?

 

[BigRob]

Why is a bubble going to develop out of it?

What would you define as a market trading a good that has no real value behind it? The fact that they will be viewed as an asset with some form of government backing (somewhat like Fannie/Freddie securities) will up the value for some business.

Once this market slows, or the carbon credit system is repealed, the entire system will collapse as people suddenly realize they are holding securities that are effectively worthless, or worth much less than they thought. (I.E. a repeat of the housing debacle)

 

[top gun]

Do you deny that the existence of a carbon credit exchange will be created from this bill?

If you accept that, then what are those carbon credits based on exactly? There is no tangible asset behind them that gives them any real value, outside of the government making it so by penalizing companies for "polluting."

That is simply the creation of another "bubble" from nothing, which will inevitably explode, hurting us all yet again.

Green technology can come about, but it needs to come about due to market circumstances, not a government manipulation of the market. We all saw how that worked out with the housing crisis and the sub-prime debacle.

The "value" of the carbon credits is the pollution that is deterred from the program as a whole.

Not everything in life has a cash it in monetary value. Although the cost to clean up advanced damage often cost much more than stopping it or slowing it down in the first place... so I guess there would be some project worth there in the lack of future clean up or restorative costs.

This is nothing like sub-prime loans. What you are advocating for plain and simply is more pollution with no cost for that pollution to be born by those creating the pollution. That would on it's face seem very wrong. At least if one was against pollution.

What's the actual "monetary value" of ANY antipollution effort? There is none. It's a regulation to foster a healthier planet & healthier people on that planet.

Why not just let factories dump hazardous waste directly into the local stream or not cause the coal companies to bear the cost of scrubber stacks? That's all a TAX on business.

Of course we know that answer. It's because any good person doesn't want their families and their children drinking dangerous water or breathing smog filled air. The same is true of greenhouse gases.

 

[AtheismIsReality]

What would you define as a market trading a good that has no real value behind it? The fact that they will be viewed as an asset with some form of government backing (somewhat like Fannie/Freddie securities) will up the value for some business.

Once this market slows, or the carbon credit system is repealed, the entire system will collapse as people suddenly realize they are holding securities that are effectively worthless, or worth much less than they thought. (I.E. a repeat of the housing debacle)

First of all, I would question your thesis.

The real estate bubble had a real estate behind it, and there was a bubble.

It is quite possible though that Wall Street might invest heavily in the scheme, if they can make their paper profits to land their bonuses. Why do they care if the market crashes? They got their pay day. I'm so glad the private sector is there to save us.

 

[BigRob]

The "value" of the carbon credits is the pollution that is deterred from the program as a whole.

So, in a carbon exchange between business, the value of what a company will have to buy is simply "deterred pollution." That is not a tangible asset, and it is certainly not something that ought to be the basis for a billion (possibly more) dollar carbon credit trading scheme.

Not everything in life has a cash it in monetary value. Although the cost to clean up advanced damage often cost much more than stopping it or slowing it down in the first place... so I guess there would be some project worth there in the lack of future clean up or restorative costs.

This is akin to saying the value of the loan you gave me will be backed with my good intentions.

This is nothing like sub-prime loans. What you are advocating for plain and simply is more pollution with no cost for that pollution to be born by those creating the pollution. That would on it's face seem very wrong. At least if one was against pollution.

What I am advocating for is not government created mandates that attempt to revamp an economy before it is ready for such a move.

What's the actual "monetary value" of ANY antipollution effort? There is none. It's a regulation to foster a healthier planet & healthier people on that planet.

Why not just let factories dump hazardous waste directly into the local stream or not cause the coal companies to bear the cost of scrubber stacks? That's all a TAX on business.

You know damn well this carbon emission legislation goes a lot further than asking someone to install a scrubber.

 

[BigRob]

First of all, I would question your thesis.

The real estate bubble had a real estate behind it, and there was a bubble.

And the money people were getting for this real estate was more than the real estate was actually worth. So by extension, if a carbon credit exchange is established (by the government mind you), it only has value because the government said so. There is nothing backing this exchange with any tangible value.

So, any price paid is effectively a bubble.

It is quite possible though that Wall Street might invest heavily in the scheme, if they can make their paper profits to land their bonuses. Why do they care if the market crashes? They got their pay day. I'm so glad the private sector is there to save us.

Wall Street is no longer risk averse, and with good reason. They took huge risks in Mexico in 1995. When it crashed, we bailed them out. Same in 1997 and 1998. Hell, same thing today. So, why would they care if it crashed? They will be bailed out, profits intact. Sure sounds like capitalism to me.

If we let the market work in the manner it is supposed work, these companies would not be involving themselves in such actions. The Mexican example is fitting. Investment houses were leveraged about 30:1 to get in very high risk Mexican government bonds paying about 12%. When it became apparent these were going to crash (and by extension hurt our banks) the United States came in, loaned the Mexican government the money to pay back the banks, with their profits. If you were a bank, why would you not take the same action action again?

Had we allowed those banks to simply take the hit, or even take fifty cents to the dollar, they would not be going after high risk action all the time knowing the government would be there to save them.

 

[TheFranklinParty]

There is no doubt that there will be wealth created in the development of a market for Cap and Trade coupons. Oh, by the way, Al Gore owns 35% of the company that will manage that market. Talk about insider trading and political influence.

The next thing is that the current Cap and Trade Bill is giving away the 85% of the initial coupons which eliminates any money that the government would pull in that was supposed to be reinvested in cleaner technology.

India and China dwarf our emissions and they are still growing while we have stagnated. Both of these countries have thumbed their nose at any form of Cap and Trade.

There is no statistical proof that Cap and Trade has had any positive influence on pollution. The data is all inferred.

If you don't think this whole thing is about money then check my latest post here on GE's influence on political decisions.

 

[AtheismIsReality]

There is no doubt that there will be wealth created in the development of a market for Cap and Trade coupons. Oh, by the way, Al Gore owns 35% of the company that will manage that market. Talk about insider trading and political influence.

The next thing is that the current Cap and Trade Bill is giving away the 85% of the initial coupons which eliminates any money that the government would pull in that was supposed to be reinvested in cleaner technology.

India and China dwarf our emissions and they are still growing while we have stagnated. Both of these countries have thumbed their nose at any form of Cap and Trade.

There is no statistical proof that Cap and Trade has had any positive influence on pollution. The data is all inferred.

If you don't think this whole thing is about money then check my latest post here on GE's influence on political decisions.

I was under the impression cap and trade was effective in reducing sulfur dioxide emissions. Are you saying that is false?

 

[Dr.Who]

Can someone explain to me how the creation of a carbon-credit market actually creates anything other than paper wealth? (i.e. a government created bubble that will inevitably crash under its own weight)

It decreases the value of real wealth while re-distributing it from non-green companies to so called green companies. The real losers are those that buy products from either of the companies.

 

[top gun]

So, in a carbon exchange between business, the value of what a company will have to buy is simply "deterred pollution." That is not a tangible asset, and it is certainly not something that ought to be the basis for a billion (possibly more) dollar carbon credit trading scheme.

Yes that is the entire reason for it To slow greenhouse gases and to conserve energy resources. It's very similar to when the government mandated that the production of leaded gasoline be stopped or that their had to be expensive catalytic converters placed on all vehicle exhaust systems.

Happens all the time.

This is akin to saying the value of the loan you gave me will be backed with my good intentions.

There is no loan... this isn't about loans... have no idea where you're coming up with this stuff... this is a type of regulation plain & simple.

What I am advocating for is not government created mandates that attempt to revamp an economy before it is ready for such a move.

Well we've made some progress already. You finally called it a mandate (or regulation).

You know damn well this carbon emission legislation goes a lot further than asking someone to install a scrubber.

It's bigger as a single thing, yes. But it's in the natural progression of things of this sort. It was hugely opposed getting rid of leaded gas. Car manufacturers swore that this deadly pollutant had to be in the mix. Same with not wanting to have to install catalytic converters... now both unleaded gas & catalytic converters are the cleaner standard and in use on every car sold now for decades. Same with scrubbers or any of the other 1000's of antipollution regulations put on the books.

As we find new problems we address them.