Video: Ready for a sub-prime carbon market?
posted at 4:15 pm on June 11, 2009 by Ed Morrissey
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Friends of the Earth, a non-profit think tank on environmental policy, asks a good question in a report and video today. Given what we’ve seen in the mortgage market, where heavy-handed government intervention created distortions that crashed the economy, why would we want to emulate that same model in carbon emissions? Think of cap-and-trade as the ultimate derivative market, based literally on vapor:
Most proposed climate bills rely on cap-and-trade systems to achieve greenhouse gas reductions, and the Obama administration also prefers this approach. But these bills do not seek to regulate carbon trading as a massive new derivatives market, which is, in fact, what it is.
This new report finds that existing financial regulations, as well as those in major cap-and-trade bills, are inadequate to govern carbon trading, creating a potentially huge regulatory gap.
It also outlines how lessons from the current financial crisis apply to carbon markets. In particular, it raises concerns about “subprime carbon,” risky carbon credits based on uncompleted offset projects (projects designed to sequester or reduce greenhouse gases).
Subprime carbon credits may ultimately fail to reduce greenhouse gases and, like subprime mortgages, could collapse in value, yet they are already being securitized and resold in secondary markets. The report recommends that lawmakers include carbon trading in current debates about financial reform, and warns against hastily creating carbon markets without proper oversight.
If that sounds familiar, it should. It’s the exact same mechanism Congress mandated on subprime mortgages in the late 1990s in order to incentivize lenders to make loans to customers who normally wouldn’t have qualified. It resulted in a major bubble in the housing markets, both in lending and in construction, with irrational expansion of home values that wound up getting highly leveraged. When prices leveled off, it set off a domino effect as the leveraging collapsed, and along with it all of the securities and derivatives attached to the subprime loans.
Waxman-Markey and other cap-and-trade bills propose the exact same system, but instead of having real estate at the center of the derivatives — which has some value at all times, no matter how unclear the actual value may be — this system gets built on carbon dioxide. It’s vaporware in the most literal sense. In fact, it’s not even based on CO2, but on the absence of CO2. When it collapses, the derivatives will have absolutely no actual value at all, which would make a resultant economic collapse even worse than what we’re experiencing at the moment.
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When this bubble pops, it’s going to smell.
Vashta.Nerada on June 11, 2009 at 4:17 PM
I want all Obama voters to hold their breath for the next 3 years. Damn all of you.
SouthernGent on June 11, 2009 at 4:18 PM
Why do you hate polar bears?
lorien1973 on June 11, 2009 at 4:19 PM
Why are human creating ‘climate bills’? I’ve gone thru the freaking rabit hole and no I didn’t take any color pill.
All 535 need to go now.
daesleeper on June 11, 2009 at 4:19 PM
humans, I meant to type ‘humans’
daesleeper on June 11, 2009 at 4:20 PM
its a non-existent commodity that has already led to accusations of corruption and manipulation. here is an article from The Economist showing the folly of it in action:
http://www.economist.com/world/international/displayStory.cfm?story_id=13724646&source=features_box3
rob verdi on June 11, 2009 at 4:20 PM
But it will put out the fires in Calfornia with all that CO2 wafting over them.
Vaporware an 1999 Internet Startup would be proud of.
WashJeff on June 11, 2009 at 4:21 PM
Al Gore = Anthony Mozillo
Vashta.Nerada on June 11, 2009 at 4:22 PM
The Chinese already told the Obamakins to take a hike on the “climate change” bullshit. We are like a drunk with a .45 sometimes pointing at the wife sometimes point at our head. Either way we get F**ked.
faol on June 11, 2009 at 4:26 PM
There can be no regulation of climate until the “baseline” day (climate in a specific geographic spot) is defined. If regulation is attempted without this being defined, how will we know
1. When we’re deviating from it, and (most importantly)
2. When we get there.
BobMbx on June 11, 2009 at 4:27 PM
But, AlGore is selling these things…so they must be a great investment, right?
Still waiting for the 2:00 a.m. infomercial with ManBearPig getting serial and selling these wonderful long-term environmentally friendly investments.
Buy your carbon credits, invest in your future, leave something for your grandkids, only $19.99, as seen on TV.
coldwarrior on June 11, 2009 at 4:31 PM
Windbag economics?
Sweet.
alohapundit on June 11, 2009 at 4:33 PM
Does the left ever rescue anything without lining their pockets? NBC/GE and Al Gore, among others, stand to profit big time if expensive but pointless carbon mandates are put on industry.
Mark30339 on June 11, 2009 at 4:33 PM
They endorsed this jackass and they knew he was going to pull stunts like this.
I’m a subscriber but I still can’t understand what in hell they were thinking.
NoDonkey on June 11, 2009 at 4:33 PM
I like this carbon trading idea. I’ve got an entire warehouse full of carbon credits in my sock drawer and I’m ready to get them on the market. Matter of fact if you order within the next 10 minutes I’ll double your order. Yes! That’s two carbon credits instead of one. All for the low price of $79.95. Buy now! By often! Supplies are unlimited. Free shipping with orders over $300.00!
jimmy2shoes on June 11, 2009 at 4:34 PM
Cap and trade is a simplistic method of controlling Carbon. It assumes that sequestering will either halt or lower the amount of atmospheric carbon which it can’t do. Large amounts of Ocean dissolved CO2 will be released into the atmosphere to reestablish the current chemical equilibrium that exists. They can’t overcome these principles by cap and trade.
chemman on June 11, 2009 at 4:37 PM
Bingo!
petefrt on June 11, 2009 at 4:38 PM
That’s the methane and mercaptan market.
Dr.Cwac.Cwac on June 11, 2009 at 4:38 PM
Polar bears are tasty. Just don’t eat the liver — too much vitamin A. They taste a bit like baby seal.
rbj on June 11, 2009 at 4:40 PM
Can we tax al gore’s farts; I mean, he’s a big guy and I bet he lets off some hellacious methane
Ris4victory on June 11, 2009 at 4:40 PM
But not as good as dolphin. :-)
coldwarrior on June 11, 2009 at 4:41 PM
I like BBQ’ed donkey meat.
I get a real kick out of feeding it to the buzzards. They’re kind of cute.
NoDonkey on June 11, 2009 at 4:43 PM
“What’s this?” thought Barack Obama. “I can feel nothing warmer at all! That is terrible. Am I stupid? Am I a flat-earther? Am I a denier? Am I not fit to be President? That would be the most dreadful thing that could happen to me. “Oh, it is very hot!” Obama said aloud. “It has my highest approbation.” And Obama nodded in a contented way, and gazed outside, for he would not say that he felt no Global Warming. The whole entourage that he had with him looked and looked, and felt no warming, any more than the rest; but, like Barack Obama they said, “It is so hot!” and Rahm Emanuel counseled him to always say that he felt hot when he was out in public, even hotter than all the Chicago troubles were making them both feel. “It is warm, hot even!” went from mouth to mouth. On all sides there seemed to be general warming, and Barack Obama gave Al Gore the title of Imperial Master of Global Warming Science.
So Barack Obama went in procession, and every one in the streets said, “How incomparable hot it is! What a hot day it is!” No one would let it be perceived that he could not feel warming, for that would have shown that he was not fit for his office, or was very stupid or a flat-earther or a denier. No day of Barack Obama’s had ever been as hot as this one.
“But I’m freezing my ass off out here!” a little child cried out at last. “Just hear what that innocent says!” said the father: and one whispered to another what the child had said. “But it is cold out here!” said the whole people at length. That touched Barack Obama, for it seemed to him that they were right; but the thought within himself was, “I must go through with feeling all the Global Warming. I do not dare to do otherwise” And so he held himself a little higher, and his aides held on tighter than ever, and proclaimed the Global Warming which did not exist at all.
MB4 on June 11, 2009 at 4:45 PM
The anti-individual freedom bias of the self-appointed “Friends of Earth” is stale but the spokesperson’s articulate and practical skepticism of the cap-and-trade proposal is refreshing.
clorensen on June 11, 2009 at 4:46 PM
This nonsense needs to be stopped. Unfortunately most people I know are completely disengaged and have no idea what Obama is really up to, even those that voted for him. His strategy of ramming shit through knowing that most average people can’t (or won’t) keep abreast of all of these initiatives is working, and that is sad. As we have a bunch of wimp Republican politicians who are afraid to stand up to him I fear we are doomed.
echosyst on June 11, 2009 at 4:47 PM
Why can’t we get that whole “tulip mania” thing that Dutch had going? Sure, it’s a scam too, but unlike the carbon trading scam, you get pretty flowers!
Knife Tornado on June 11, 2009 at 4:48 PM
Wall Street + Sub-prime = Greed : Bad
Congress + Sub-prime = Green : Good
Simple!
ROCnPhilly on June 11, 2009 at 4:50 PM
Al Gore = Charles Dawson
MB4 on June 11, 2009 at 4:50 PM
Video: Ready for a sub-prime carbon market?
No Thanks, I’ll Pass, I’m Good, Thanks For Asking.
Dr Evil on June 11, 2009 at 4:52 PM
Al started a hoax. Which started the whole world thinking they were going to be a frying.
But what Al didn’t see was that the joke would be on he.
Oh, no, Al started to cry. Which started the whole world laughing.
Oh, if he’d only seen that the joke would be on he.
Al looked at the skies. Running his hands over his snowed up eyes.
And he fell from his throne. Cracking his head on the ice and choking on things that he’d said.
Till Al’s power finally died. Which started the whole world
livingdrilling.Oh, if he’d only seen that the joke would be on he.
Oh, no, that the joke would be on he.
MB4 on June 11, 2009 at 4:52 PM
What will the trees,grass,plants and every other vegetaion live off when we all hold our breath?
fourdeucer on June 11, 2009 at 4:55 PM
This market is perfect for crime.
It will help the opium grower get carbon offset monies at planting time.
seven on June 11, 2009 at 4:59 PM
Cap and Trade.
Harvard in action (or as much action as you’ll ever see).
But when you’re eating dirt, rest assured that they will be securely ensconced in their government jobs.
notagool on June 11, 2009 at 5:03 PM
It is not about the CO2. it is about the money scheme. China’s talks broke down this week anyhow.
George soros the convicted felon uses climate progress to push the scams. Joseph romm says we have to act quickly or die. It is so ironic the pastor in church last night from australia, mentioned fear is of the devil. They use fear in witchcraft also.
seven on June 11, 2009 at 5:03 PM
Hey let ‘em go. This President and Congress will so devastate this country, when it’s finally tanked, the public will declare open season on them.
GarandFan on June 11, 2009 at 5:06 PM
Cap and trade will be the next boondoggle.
Terrye on June 11, 2009 at 5:15 PM
$4 an ear they get for Nutria in Louisiana, I say $1000 an ear’s about right for donkeys.
NoDonkey on June 11, 2009 at 5:16 PM
If I fart in a jar do I get a tax credit?
txag92 on June 11, 2009 at 5:20 PM
If you promise to contribute half of it to Barack Obama’s re-election campaign, the answer is “yes”.
NoDonkey on June 11, 2009 at 5:23 PM
If you promise to contribute half of it to Barack Obama’s re-election campaign, the answer is “yes”.
NoDonkey on June 11, 2009 at 5:23 PM
I’ll keep farting loud and proud then. :)
P.S. Please don’t tell my parents I said fart on a blog…. twice.
txag92 on June 11, 2009 at 5:26 PM
I’ll see your CO2 and raise you a cow fart.
wonk-a-donk on June 11, 2009 at 5:34 PM
No problem, your tooting is the sound of music compared to one of Great Leader’s speeches.
And your butt doesn’t even need a teleprompter, I’ll wager. It knows the words and the hymn.
NoDonkey on June 11, 2009 at 5:34 PM
So Carbon won’t be a tradeable commodity? I bet I could set my toaster on full speed ahead and get some right now.
kirkill on June 11, 2009 at 5:37 PM
This is actualy a perfect example of one of my thesis on the current problems with the economy.
The current economy is based on nothing. Its people playing games with Monopoly money.
It used to be that Stock holders OWNED the company, but now they can get wiped out and the company can still exist, and even be given to someone else (Chrysler/Fiat?).
It used to be if you held someones mortgage it had an intrinsic value because of the property… now they are resold as derivitives and no one seems to own the property itself.
Money is now leveraged up to 25 times through Fractional Lending to “create” more money/debt…
Took awhile to find it, but Banking and finance is right at 8% of GDP… so one out of every 12 dollars spent in America is used to move money around….
Banking used to be a support system needed for the rest of the economy, but now it is an entity in and of itself… and is now DRIVING policy…
Romeo13 on June 11, 2009 at 5:37 PM
As long as you use your casual face.
kirkill on June 11, 2009 at 5:38 PM
After the Kyoto Protocol was signed (without US ratification), the European Union (the countries that then belonged to it) set up a trading system in “carbon credits” allowing the emission of a ton of carbon dioxide. Trouble is, the governments handed out too many of them, and emitters found it easy to meet the targets and sell the extra credits. Carbon credits that had at one time sold for over 30 Euros declined in value at one point to 0.09 Euro.
A market that had shown a 300-fold price swing in Europe is easy pickings for the most unscrupulous manipulators and speculators. Imagine if such a system existed in the United States, and some super-rich tycoon like George Soros bought huge amounts of cheap carbon credits during a time of slack economic activity, not with the intention of emitting CO2 or planting trees, but of simply cornering the market, and selling them back to emitters during an economic expansion, when energy consumption was higher, for huge profits.
This could enable such tycoons to steal fabulous wealth for themselves from power companies, which would pass along their costs to consumers, whose electricity costs could double or triple.
Cap-and-trade CAN work for REAL pollutants, such as nitrous oxides or sulfur dioxide, where reasonably-priced add-on control technology can reduce emissions by 95% or more, and polluters can make money by installing pollution controls and selling emission rights to others.
But carbon dioxide has NO toxic effect on humans or the environment, except for some slight theoretical warming of the climate centuries from now, which has yet to be proven. It is generated in huge quantities by anything that burns, and there are no cheap ways to capture it, so cap-and-trade on CO2 is essentially a huge tax on energy consumption, and a money-making scheme for governments and rich speculators.
Steve Z on June 11, 2009 at 5:42 PM
MB4 on June 11, 2009 at 4:52 PM
A BEE GEE’S SONG! The sad part is I knew it. I am going to commit carboncide now.
faol on June 11, 2009 at 5:44 PM
That is perhaps the best explanation of the Crap and Charade plan that I have ever seen.
exceller on June 11, 2009 at 5:47 PM
As long as you use your casual face.
kirkill on June 11, 2009 at 5:38 PM
That’s hilarious. Thanks for the laugh. I needed it.
txag92 on June 11, 2009 at 5:50 PM
Brilliant. The vaporware business seems to be thriving way across:
Interpol has warned the carbon market will be irresistible to criminal gangs because of the vast amounts of cash to be made. Possible rorts include under-reporting of carbon emissions by firms and bogus carbon offset schemes.
“If someone is rorting it by even 1 per cent a year, we’re talking about many, many millions of dollars,” Mr Torr said.
Yep, and Al Gore the Vaporware King miraculously turned a few million dollars into a hundred million – not that there’s anything wrong with that!
Buy Danish on June 11, 2009 at 6:11 PM
Argh. I hate when I do this –
…way across the pond.
Buy Danish on June 11, 2009 at 6:12 PM
The most ludicrous thing about the scheme is the basic fact CO2 cannot be controlled to the extent anything mankind does will change the earth’s course.
96% of annual CO2 emissions come from natural sources. 4% come from the sum total of mankind’s activity. So if we all commit suicide…every last one of us, after shutting down the lights and power plants and other accoutrements of our presence on the planet…the CO2 “engine” will continue to run at 96% “throttle”.
The above is my favorite conversation stopper with MMGW enthusiasts, because I ask why we are so crazy over CO2 when even killing us all would do virtually nothing. “Explain, please?” In four years, no answers, and they agree with the level and source of emissions above.
This is not about climate change but government control over people by a political class that promotes the best reasons for the basest purposes.
No wonder people are buying guns and ammo so rapidly.
Harry Schell on June 11, 2009 at 6:19 PM
I know what the temperature IS.
Can someone PLEASE tell me what it is supposed to be?
And WHY it is supposed to be what you THINK?
TexAz on June 11, 2009 at 6:40 PM
Europe’s Cap-and-Trade Scheme a Cautionary Tale for the U.S.
..
The major cap-and-trade bill now working its way through Congress is not without precedent. The European Union has had a cap-and- trade regime in place for years. It just hasn’t worked so far.
Begun in 2005, the EU’s Emissions Trading Scheme has raised energy prices with “uncertain” effects on greenhouse gas emissions, according to numerous studies.
Even green groups have been critical. The Natural Resources Defense Council, for example, has called ETS “an example of what not to do.”
*********
*ONLY IN AMERICA….MUST WE SPEND BILLIONS BECAUSE WE CAN’T LET CHRYSLER GO BANKRUPT, AND THEN, LET CHRYSLER GO BANKRUPT.
..
*ONLY IN AMERICA….CAN CONGRESS FORCE FANNIE AND FREDDIE TO BUY SUBPRIME LOANS, AND THEN BLAME FANNIE AND FREDDIE FOR BUYING SUBPRIME LOANS.
..
*ONLY IN AMERICA….A MAJOR CRISIS REQUIRES SWIFT ACTION TO PASS A BILL WITHOUT READING IT, THEN VACATION FOR THREE DAYS BEFORE THE PRESIDENT HAS TIME TO SIGN IT.
..
*ONLY IN AMERICA , CAN YOU GET A TAX REFUND ON TAXES YOU DIDN’T PAY
..
*ONLY IN AMERICA, YOU HAVE MORE RIGHTS BEING ILLEGAL, THAN YOU DO LEGAL
..
*ONLY IN AMERICA, CAN YOU BE 13 AND HAVE AN ABORTION WITHOUT TELLING YOUR PARENTS, BUT MUST HAVE A WRITTEN NOTE FROM YOUR PARENT WHY YOU MISSED SCHOOL.
heroyalwhyness on June 11, 2009 at 6:40 PM
Cap-and-trade is needed to raise the price of gas so we will by the little cars Fiat makes with a Chrysler name tag.
Gas in the USA costing the same price as Europe is the goal. Cap-and-trade is the means to that end.
MHatch on June 11, 2009 at 7:03 PM
I noticed she used the word “foist” properly.
ctmom on June 11, 2009 at 9:05 PM
Brilliant! Keep that list updated.
daesleeper on June 11, 2009 at 9:11 PM
It’s incredible how stupid this ideas is, the end result is just more taxes, reduced standard of living and zero reduction of the thing they are trying to regulate. (which doesn’t need regulating BTW)
whbates on June 11, 2009 at 10:10 PM
The dynamics of the cap & trade system need to get much greater scrutiny. It is madness to create a paper commodity (the “carbon credit”), and then operate an artificial market on a national basis which cuts across all aspects of US industrial activity. It is hopelessly naive to think that something this radical will not have dozens of unintended consequence, some large enough to swamp entire industry sectors.
Anyone who thinks they can oversee and control this monster has a serious God-delusion. Oh, wait… somebody already told us that.
blueguitarbob on June 12, 2009 at 8:52 AM
It’s the end of the world as we know.
TheSitRep on June 12, 2009 at 9:25 AM
And no, I don’t feel fine.
TheSitRep on June 12, 2009 at 9:25 AM
We wouldn’t need all this Carbon Cap and Tax stuff if mankind could just develop a simple device to sequester carbon that could be placed in everyone’s front and back yards, and line city streets! IF ONLY……..
..
..
..
Oh, wait that would be TREES!
JeffVader on June 12, 2009 at 12:09 PM
Great when this starts I will quit my job and and day trade carbon. Friends of the utterly stupid.
feedercattle on June 12, 2009 at 12:22 PM
The Heritage Foundation has the following link as a way to stop the EPA’s attempt to impose carbon limits while circumventing the Congress:
http://www.stopepa.com/
.
It only takes a minute to fill out the form.
JeffVader on June 12, 2009 at 1:01 PM
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