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Carbon Price just jumped 30% — It’s not a free market, it’s a fixed charade

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Jo Nova
December 22, 2011

A small group of selected rulers just raised a hand, changed the rules, and sent billions of dollars from some people to some others.

This type of arbitrary control over the  carbon market shows why it is a misnomer to call it a “free” market, and why a “market” is the wrong tool to try to use to reduce emissions. CO2 is a universal molecule, found in every walk of life and many inanimate processes. We can’t include them all, and someone somewhere gets to decide which ones count and which ones don’t, and how many of them we are allowed to emit in the first place.

Supply and demand of CO2 emissions are not set by a free market (you know, voluntary and willing participants exchanging things for mutual benefit). The bureaucrats just mandated an illusion of market forces, within a range set by said ‘crats. The price of carbon credits had gotten too painfully low for the rulers and their patrons and fans, so something had to be “done”. They made the carbon caps more stringent. If the price was too high, they would have loosened them (and they admit as much below). This has nothing to do with the environment or science, and everything to do with a plutocracy charging “what it can get away with”.

Now, are they doing this more for your benefit, or theirs? Cui bono?

Any efficiency gains we get from the “free market” are destroyed by the losses due to corruption.

 

Bloomberg:

Carbon allowances rose as much as 32 percent on speculation that an amendment to an energy efficiency law voted today raised the likelihood of the EU curbing oversupply and supporting prices in its emissions trading system. Concern that the new energy- savings regulations will further cut demand for pollution rights at a time of economic slowdown helped knock carbon prices to a four-year low last week.

“The compromise amendment was adopted almost unanimously,” Peter Liese, a deputy from the EuropeanPeople’s Party in the parliament, told a news conference in Brussels today. “We approved a careful intervention in the ETS.”

“It’s an amendment of change in the current policy,” Liese said. “If you decide that a price is too low, you’ve also got to decide when a price is too high.”

Carbon Price just jumped 30% — It’s not a free market, it’s a fixed charade

Lubos Motl talks us through the potential for corruption:

“According to Bloomberg and others, the European Union Parliament’s environment committee backed a decision to make the “carbon caps” more stringent in the following years, i.e. to extract some carbon indulgences from the market.

The price of the permits for one ton of CO2 instantly jumped by 32 percent or so, from €7 to €10 or so. The committee which has 68 members may de facto change the worth of this trillion-euro industry by a third in a few minutes, just by raising their hand.

The financial transfers caused by raising the hand are equal to tens of billions of dollars per person. Now, try to convince me that these people are acting neutrally, without any external pressures and connections, …

It’s unthinkable that these people in the environment committee have never communicated with the holders of the carbon indulgences. They’re almost certainly among the people whom they communicate most frequently with. So imagine that you’re a holder of €10 billion in carbon indulgences who knows a guy who may organize such a vote that will increase the value of your holdings to €13 billion. You may make a profit of €3 billion so you surely want to convince your friend in the EU Parliament to organize the vote.

If the Yes outcome is not guaranteed, the details will change but the fact that there is a potential for giant corruption – almost inevitable corruption – doesn’t change. If the votes are uncertain, a sufficient number of them may be bought. Let’s say that 25 committee members are guaranteed Yes-voters. You need just 10 more “undecided” to vote Yes. Again, if you know that your wealth will jump €3 billion as a result of the vote, you have a pretty good amount of money to influence 10 people how they should vote. Of course that 1,000 times less would be enough.”

Visit Lubos to read his whole article.

This article was posted: Thursday, December 22, 2011 at 4:48 am





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