Emissions trading broken?

[Admiral Yi]

It encourages companies to pollute in the same way a car registration fee encourages people to buy cars.

[Viking]

As far as I'm aware, emissions trading was invented by Enron. I remember reading about it when I worked there and thought at the time it was pretty evil and would ultimately fail to reduce global emissions, if not actually encourage the richest, worst polluters to do it without financial or legal repercussions.

http://en.wikipedia.org/wiki/Acid_Rain_Program

Not to my knowledge. The SO2 program in the USA was the basis for the european and all other trading schemes for the simple reason that it worked.

[The Minsky Moment]

I agree with the Guller-Yi positions.

The market is working exactly as designed.  The permit supply is set exogenously by government fiat.  If the supply was set too high, that is a problem with the governmental decision making process, not the trading market.  This is a classic case of shooting the messenger.

[Admiral Yi]

As far as I'm aware, emissions trading was invented by Enron. I remember reading about it when I worked there and thought at the time it was pretty evil and would ultimately fail to reduce global emissions, if not actually encourage the richest, worst polluters to do it without financial or legal repercussions.

http://en.wikipedia.org/wiki/Acid_Rain_Program

Not to my knowledge. The SO2 program in the USA was the basis for the european and all other trading schemes for the simple reason that it worked.

Right.  Enron came up with the idea for the electricity wholesale market.

[grumbler]

I agree with the Guller-Yi positions.

The market is working exactly as designed.  The permit supply is set exogenously by government fiat.  If the supply was set too high, that is a problem with the governmental decision making process, not the trading market.  This is a classic case of shooting the messenger.

Yeah, i am surprised that so many on this board are so totally ignorant of economic principals.  Market pricing is a mechanism, not an objective.  If a slow economy allows companies to meet emission targets without high costs, they can invest capital that would have been spent reducing emissions on improving other efficiencies.  That's not failure.   That's success.

[Tamas]

In related news, I read that the EU and it's airline companies face various punitive measures from what is by all intent and purposes the rest of the world, after the EU insists on taxing airplanes via indulg... carbon emission permits after their entire flight path, upon take-off or landing on European soil. Needless to say this does not bode well with stuff like a New York - Paris flight.

China flat-out refused it's airlines to pay the sin-repention tax without getting permission from their own government first, and the big gathering of nations (including the USA) which will happen in Moscow on this topic will look into their trade treaties with the EU in general.


The EU is a magnificent idea, the only road forward for the nations on the continent, but I can't help thinking that it has become something like medieval China, collapsing under the weight of it's own bureaucracy

[Admiral Yi]

I'm on the EU's side on this one.  It's not that much different from an airport tax, and it would only add around 2-3 euros per ticket.

[OttoVonBismarck]

I don't know much about emission certificates markets but I thought the whole idea was the government created a pool of them that had a fixed size, this total fixed size represents how much "total emissions for all the covered industries/emission types" is desired. My understanding is companies that go over their emissions allowance and exhaust their supply of credits have to pay some sort of penalty.

As long as the total supply of the certificates is such that it represents some decrease in total country-wide emissions prior to the issuing of the certificates, I fail to see how the price point of the certificates being low or high would necessarily impact total emissions country-wide. Yes, it may mean that some buyers will buy a bunch of them and pollute very heavily--but since the pool is fixed size that obviously means someone else isn't going to be able to do that.

Now, if the penalty for going over the emissions limits for your site (assuming you've done this and exhausted any credits you have) is extremely minor I can see how the credit system may not be substantially lowering emissions. However, as long as the penalty for going over is somewhat significant it will force those polluters to meaningfully increase the price of their product which will have its own limiting effect on emissions long term.

[Zanza]

In related news, I read that the EU and it's airline companies face various punitive measures from what is by all intent and purposes the rest of the world, after the EU insists on taxing airplanes via indulg... carbon emission permits after their entire flight path, upon take-off or landing on European soil. Needless to say this does not bode well with stuff like a New York - Paris flight.

China flat-out refused it's airlines to pay the sin-repention tax without getting permission from their own government first, and the big gathering of nations (including the USA) which will happen in Moscow on this topic will look into their trade treaties with the EU in general.


The EU is a magnificent idea, the only road forward for the nations on the continent, but I can't help thinking that it has become something like medieval China, collapsing under the weight of it's own bureaucracy

Jet fuel is tax free and that's a massive distortion of the transport market in favor of airlines as every other transportation mode is taxed heavily. Introducing some kind of price for carbon emissions of aircraft makes sense to level the playing field. We should ban Chinese airlines from the EU if they are not willing to play by our rules. It's not like Beijing gives a fuck for what we think is proper either when setting policy (e.g. intellectual property protection, ownership rights etc.).

Your kneejerk anti-EU reflexes are probably what's to be expected of one of Orban's subjects though. 

[Tamas]

So the moral choice when facing irregularly high taxes on a sub-division of a sector, is to raise taxes on the rest of that sector, ha? 

[DGuller]

Your kneejerk anti-EU reflexes are probably what's to be expected of one of Orban's subjects though.

[The Brain]

Cheap stuff is bad. I see that clearly now.

[KRonn]

The EU is a magnificent idea, the only road forward for the nations on the continent, but I can't help thinking that it has become something like medieval China, collapsing under the weight of it's own bureaucracy

You crazy bastard nations were better off, stronger, more robust, wealthier, when you were all fighting over some damn fool crown, colony or at the whim of a bored emperor.   

[Ideologue]

The EU is a magnificent idea, the only road forward for the nations on the continent, but I can't help thinking that it has become something like medieval China, collapsing under the weight of it's own bureaucracy

The problem was allowing any member state to remain independent.  We realized that shit doesn't work in like a decade, and we fixed it.  You guys are still chugging along with your confederation of crap, a "superstate" that can't even protect its constituents' rights in Hungary and appears more and more to be merely a vehicle for the advancement of German banking and manufacturing interests.

[DGuller]

The EU is a magnificent idea, the only road forward for the nations on the continent, but I can't help thinking that it has become something like medieval China, collapsing under the weight of it's own bureaucracy

The problem was allowing any member state to remain independent.  We realized that shit doesn't work in like a decade, and we fixed it.  You guys are still chugging along with your confederation of crap, a "superstate" that can't even protect its constituents' rights in Hungary and appears more and more to be merely a vehicle for the advancement of German banking and manufacturing interests.

It's not like our superstate could protect its constituents' rights either, or at least cared to.  Took us almost 200 years to succeed, more or less.