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Tuesday, February 27, 2007

Kyoto "cap and trade": A very 21st-century Ponzi scheme?

As the 1920s began, Charles Ponzi offered customers returns on their investments of 20% in a matter of weeks.  He managed to pay out the promised returns by financing it with the capital from new investors . . . for awhile, till it all came crashing down.

As I understand it, the Kyoto cap and trade system puts "caps" or ceilings on each country's greenhouse gas emissions (CO2, H2O, CH4, and others -- "GHG").  Countries whose GHG emissions don't reach their cap can claim "credits" based on how far below the cap their emissions are.  Those countries can sell their credits to countries whose GHG emissions exceed their caps or targets -- country to country "trading" (cash for credits).  Markets have been created for the trading -- selling -- of GHG credits between companies:  the European Trading Scheme (mandatory in the EU) and the Chicago Climate Exchange (CCX).

The World Bank estimated the market in carbon trading totalled about US$10 billion in 2005.  In a recent speech, Paul Wolfowitz, World Bank President, speculated that carbon trading transactions could soon total US$200 billion a year, half of which could flow to developing countries, compared with US$84 billion a year currently flowing in the form of foreign aid.

So, one way of looking at cash for credits is as a new way of doing foreign aid -- a giant redistribution of wealth from rich countries to poor countries.  The difficulty with this is that for all the complaints about accountability on foreign aid, what would happen to accountability under foreign aid done as cash for credits, er, carbon trading?  And what happens as a poor country increases its economic output?  Economic output is accompanied by increased GHG emissions -- compare Canada's GHG emissions during the recession of the 1980s with its GHG emissions in the high-growth years of the 1990s.  As poor countries increase their output, they will tend to eat up their GHG credits with GHG emissions.  As poor countries' economies become dependent on cash for credits -- carbon trading, this could-will become a disincentive to economic growth and productivity in those countries.

But it's more of a problem than just accountability for foreign aid framed as carbon trading.  'Cause carbon trading isn't like trade as we ordinarily understand it.  It really is cash for credits.  Are GHG credits fungible assets?  I leave that to those with better heads for finance than mine.

GHG emissions are produced by oxidizing fuel -- burning it.  That's true whether it's burning wood, coal, heating oil, gasoline and diesel,  jet fuel, propane, butane, natural gas (methane), cattle's digesting grass or grain, converting corn or garbage to biodiesel or other biofuels, or burning those biofuels.  As economies grow and create wealth, they tend to move away from high-carbon, low-hydrogen fuels to lower-carbon, higher-hydrogen fuels (Jesse Ausubel, Rockefeller Institute).

In Canada, we started out heating our homes by burning wood.  Then we moved to burning coal.  Then, heating oil.  And now, increasingly, natural gas.  That is, over the last 100 years or so, to heat their homes Canadians have moved away from high-carbon, low-hydrogen fuels toward low-carbon, high-hydrogen fuels.

"High carbon-low hydrogen:  bad."  "Low carbon-high hydrogen:  good."  The more carbon, the more CO2 produced by burning the fuel.  The more hydrogen, the more H2O -- water vapor -- produced by burning the fuel.  Yes, yes, I know.  Water vapor is a GHG.  But which would you rather breathe in?

So, these are my questions . . . (for more of "Kyoto "cap and trade":  A very 21st-century Ponzi scheme?" go to Burkean Canuck).

Posted by Russ Kuykendall on February 27, 2007 in International Affairs | Permalink


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The potential for corruption, decay and destruction of viable economies is unfathomable.

This scheme must not be allowed to prevail.

We must find ways to adapt to the new reality of too many people blowing their existential farts in each others faces.

If we simply relax and wait while living our lives .. there will be a die of or two ... then there will be less to worry about.

Prosperity means growth ... unlimited growth on a finite ball in space is finally proving to be unsustainable so as the wall approaches we simply have not got enough air bags to go around.

As hit the wall we can lament not doing many of the things we should have done, but woulda, shoulda, coulda, won't matter.

To quote many a street whacko over the years ...

"The end is near"

Well for many at least.

Better get those condos in orbit soon or even the Gores and Suzukis of the world will be getting some dog poop on their shoes.

Posted by: John | 2007-02-27 12:15:48 PM

Apparantly Gore stepped in a little this week with the report of his electricity consumption being 20 TIMES higher than the average American household. I suppose he's a guy who can afford carbon credits, so why not?

Posted by: lwestin | 2007-02-27 5:14:43 PM

Kyoto is a scam - it's akin to televangelists promising salvation in exchange for donations, or a get-rich-quick scheme. Therefore it is not surprising that the Liebrals and Dippers attached themselves to it (even belatedly). They have no sense when it comes to good deals.

Besides, the sooner Kyoto is abandoned and left for scrap, the faster we can get on with the task of fighting global warming.

Posted by: Zebulon Pike | 2007-02-27 5:50:22 PM

"Yes, yes, I know. Water vapor is a GHG. But which would you rather breathe in?"

That's not the issue. It you dump an extra few tons of water vapour into the air, it will rain out of the atmosphere within a day or two...two weeks, tops. The CO2 you put in the air is there indefinitely.

Posted by: pete e | 2007-02-27 6:22:00 PM

And that, "pete e," was exactly my point. :-)

According to Jesse Ausubel of the Rockefeller Institute, as countries industrialize, they move from burning high-carbon energy sources to low-carbon, high-hydrogen energy sources (see the diagram). That means the more highly industrialized countries tend to emit GHG with a higher percentage of water vapor than they did when they burned higher carbon energy sources.

That brings up my question, again, about whether biodiesels are low-carbon, high-hydrogen or high-carbon, low hydrogen compared to gasoline.

Posted by: Russ Kuykendall | 2007-02-27 9:52:12 PM

We are now at a point where we are buying and selling nothing for billions of dollars. Hard earned tax dollars. If this whole concept was'nt so stupid it would really be funny.

Posted by: peterj | 2007-02-27 10:00:35 PM

"The CO2 you put in the air is there indefinitely."
Posted by: pete e | 27-Feb-07 6:22:00 PM

Not so.
CO2 is sequestered from the atmosphere by plant growth.
Specifically trees.
The longer trees grow the more CO2 they sequester AND the longer they sequester it.
(until you burn the wood)

It is a delicious irony that the greatest kiboshers of nuclear power used to have as their motto: Split WOOD not ATOMS.(meaning to cut down and BURN trees for heat therefore releasing the sequestered CO2)

These same people are today Champions of the Kyoto Protocol.

Posted by: Speller | 2007-02-27 10:27:56 PM

Which begs the question - who REALLY benefits if Kyoto is implemented, and also, who benefits if this is all just a ruse.

The anti-nuclear power fear mongering was instigated and financed by the oil guys - including ever helpful Maurice.

Posted by: lwestin | 2007-02-27 10:38:34 PM

The Kyoto scheme would be so full of people on the take it would never seriously get off the ground, it would be the 'low hanging fruit' of corruption, too tempting for all our good liberals to ignore.

Posted by: philanthropist | 2007-02-27 11:54:18 PM

Seriously. If we were to lower emissions or at least stop growing them(and really who and how are these even counted?) then turfing immigration targets of 500,000/annually would be a good start.

You know most immigrants come from Tropical parts of the world?

Posted by: Speller | 2007-02-28 12:05:39 AM

I think you're missing a big piece of the puzzle here. H2O is the primary driver of "runaway global warming". The GCMs assume that, as CO2 rises, a resulting increase in ocean temperature will cause greater evaporation and thus a much greater concentration of H2O in the atmosphere -- and it is THIS water vapor, not CO2, that is feared by climate modelers as the big contributor to the looming disaster. CO2 becomes but a bit player with progressively declining influence.

Your logic instantly exposes the absurdity inherent in the gloom-and-doom predictions. "Fighting" global warming is no more productive than fighting your shadow. Whether a climate disaster looms remains an open question; whether it will come about the way the scaremongers predict is decidedly unlikely.

Posted by: skigod2000 | 2007-03-01 2:10:42 PM

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