Today’s question is this: Would you buy a used carbon market from the following self-proclaimed “masters of the universe”?
That is, the same giant investment houses that just finished helping to crash the global economy by recklessly trading in risky subprime mortgage loans and other bizarre investment vehicles few people understood?
Would a glowing endorsement of a mandatory, North American cap-and-trade market in carbon dioxide emissions by, say, American International Group (AIG), recipients of $173 billion in bailout money from U.S. taxpayers, make you more or less well disposed to the idea?
How about praise for carbon trading from the folks at JP Morgan Chase & Co. ($25 billion in bailout money), Morgan Stanley ($10 billion) or Merrill Lynch ($10 billion)?
How about from Goldman Sachs, Wall Street’s mightiest bank, recently accused of civil fraud by the U.S. Securities and Exchange Commission over the sale of subprime mortgage securities? (The company denies the charges.)
How about a big cheer for carbon trading from its earliest corporate boosters — the fraudsters at Enron — who giddily predicted it would “do more to promote Enron’s business than almost any other regulatory initiative outside of restructuring the energy and natural gas industries” and would be “good for Enron stock?”
Save for the now-defunct Enron, all the other big investment houses, some of which have paid back their bailout loans but not the unimaginable amounts of cash they cost the global economy, are enthusiastically gearing up for mandatory carbon trading.
Many are spending big money lobbying U.S. politicians to deliver it, complete with all the exotic investment opportunities it will provide.
That’s because carbon trading — cap-and-trade — amounts to creating a new stock market out of, pardon the pun, thin air.
Governments in North America are about to create a new trading commodity — carbon dioxide — by putting a price on its emission into the atmosphere, along with several other greenhouse gases, when fossil fuels are burned for energy.
The basic stock unit of this new market worth, potentially, trillions of dollars, will be a carbon permit — the market cost of emitting one tonne of carbon dioxide, a colourless, odourless gas, which can then be traded by businesses and governments — theoretically — to meet their emission reduction targets.
Gee, what could possibly go wrong?
Europe already has a carbon market, the Emissions Trading Scheme, which has not only failed to lower emissions (the global recession did a much better job of that), but is beset by multi-billion-dollar frauds.
Meanwhile, the UN’s Clean Development Mechanism, where developed countries can obtain carbon credits by investing in third-world emission reduction schemes, is rife with allegations of corruption, profiteering and fraud.
The major problems are that many of the claimed emission reductions are phoney, or would have happened anyway, without carbon trading.
If all this causes you to think that maybe carbon trading isn’t such a good idea, then you have to ask yourself:
Why do U.S. President Barack Obama, Prime Minister Stephen Harper, and so many other politicians across North America, keep insisting that it is?
In fact, cap-and-trade is, demonstrably, such a bad idea that even a carbon tax would be better, in the sense of being the lesser of two evils.
Or, put another way, the least stupid way of doing something stupid.