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The rest of the world: Cap and Trade

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Though Republican Senators ultimately blocked the US Cap and Trade bill in 2008, nations around the world have embraced its peculiarities in the hopes of lower carbon emissions. As a result, all airlines to and from the EU are now required to enter into a Cap and Trade plan. Travelers can expect higher airfare as a result. (citation).

Though professed to be a “financial incentive” to lower carbon emissions, the result is more likely to be merely a emissions-shuffling scheme. “Carbon credits” are purchased like a license to produce so many tons of carbon emissions. When a company lowers their carbon emissions, they may qualify to sell their carbon credits to another company. Unless an international administrative body takes authority over the system, there would be no real incentive to reduce the amount of “carbon credits” in circulation, and thus, the carbon emissions in the world. Just like sloshing water around in a bucket, any point might have a higher water level than the other, but it’s still the same amount of water.

The real incentive for a Cap and Trade scheme seems to be that it is the world’s first, international, fiat commodity — that is expected to overtake all others in value. There is money to be made in this brand new market.

Should somebody decide they can open a “carbon credit bank” and charge interest on loans of these credits when businesses struggle to curb their emissions, we would have a new kind of world bank, overseen by no government, with loan leverage against all nations borrowing from it. Not to mention a global appraisal board that must be called on each time a company wants to shed its credits.

“Carbon credits” are fiat commodities, and likely the first of its kind.

Leave it to bankers to make another Frankenstein “exotic financial instrument” like “derivatives” and “futures” — and what a great idea those were.


Written by Jonathan Mark

January 7, 2012 at 8:21 am

Posted in News, Opinions

Tagged with ,

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