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Nature: carbon trading is a farce

Nature News published an unusually candid article about the carbon trading scheme:

Clean-energy credits tarnished
The text discusses diplomatic cables leaked by WikiLeaks last week. In those cables, diplomats reveal that they have understood that most of the CDM (Clean Development Mechanism under the U.N.) projects in India don't reduce the greenhouse-gas emissions at all. We learn that the very idea of a greenhouse-gas emissions trading scheme is "seriously flawed", "farce", and so on.

These bugs affect hundreds of millions of tons of CO2 emissions that someone got paid for: that's billions of dollars. However, no CO2 emissions were even reduced (and we don't even have to discuss whether such reductions would have any impact on the environment: surely not a detectable positive one). India only witnessed reductions that would be "achieved" even if the Europeans didn't participate at all.

And this is just India, a tip of the iceberg. Every year, the industrial activity of the world releases approximately 30 billion tons of CO2 into the atmosphere, whether you like it or not. If $23 (like in Australia) is paid to someone for each ton that he emits "elsewhere" (i.e. for free), the world needs to pay $0.7 trillion a year. More than one percent of the GDP is thrown out of the window – without any positive effects.

It's obvious that such a system – carbon emissions trading scheme – simply cannot work. The problem is not with the trading of something: trading always works. The real problem is that the price is being distorted by various powerful people and the government and all of the money that is circulating in this business is a result of these distortions.

The reason is that the true market price of the carbon emissions is obviously zero (rather than a number such as $15 or $23 per ton of CO2). This proposition is not just an artifact of our being climate skeptics (who are convinced that the effect of CO2 on the climate is negligible and other effects of elevated CO2 are beneficial). Even if you believed that the CO2 emissions are harmful, it simply costs zero to emit CO2. At least somewhere.

Volcanoes (such as Mount Etna that erupted yesterday) are emitting millions of tons of CO2 and they're not paying any money to anyone. The owners of such volcanoes, such as the Italian nation, don't pay anything, either. I could give you of course many other examples besides volcanos – dying vegetation or nations that don't participate in the CO2 Ponzi schemes.

So it is possible to emit CO2 for free. Under these circumstances, it's always possible to permute and rearrange the flow of the CO2 so that you emit the CO2 in ways for which you don't have to pay anything, but you get the credits as if you reduced CO2. As long as some nations don't fully participate in the CO2 regulation, this point is obvious.

But even if all nations were forced, by a global junta, to participate in the anti-CO2 jihad, it would still fail to work because the global junta wouldn't be able to control the volcanoes and many other things. I can still store my CO2 inside a volcano and say that it's been sequestered. The amount of CO2 in the volcanos grows and at some point, the volcano erupts and releases all the CO2, including the CO2 for which someone received billions of dollars.

How can you prove that someone should return the cash for his carbon indulgences?

You can't trace the individual CO2 molecules and even if you could, there is simply no canonical or well-defined way to say which motion of a CO2 molecule should be taxed or paid for and who should get the money. It's simply not physically possible because any motion of a carbon atom from one place to another is "morally neutral" and humans moreover don't control most of the carbon cycle. The politicians wouldn't control most of the carbon cycle in Nature even if they managed to control all the people who live on Earth.

Things that naturally exist in larger concentrations than what is being added and that almost instantly spread across the globe (in days or weeks) simply cannot be controlled, regulated, or assigned a price. The market – and the laws of Nature – are the only ones that can do such things. And they deal with the amount of CO2 in a simple way: they allow the CO2 concentration to do whatever it wants to do. Everyone else must adapt to these external conditions: you can't revert the causal relationship.

Another feature that makes a sensible trading with allowances impossible is that there is never any fast liquidity in the game. When you trade positive things such as currencies or oil, you deal with many people who need some cash or fossil fuels right now. And they are ready to pay you something else. However, you never really need carbon indulgences right now: you may always store all the emissions in a tank and release them later. So the spot prices are never really spot prices; the price dynamics is always governed by speculations about whether or not the politicians will finally abandon this scheme next year or not, and whether or not they will raise the caps etc.

In the real world, the CO2 level is dictated by the markets and by the laws of Nature and it has to be so. Any bureaucrats' attempt to prescribe Nature what its CO2 concentration should be in 2040 is both immoral as well as unrealistic. It's just a wishful thinking and all the money paid for such attempts will end up in the pockets of the speculators and crooks. At current prices, we are talking about more than half a trillion dollars a year that is thrown to the trash bin.

Of course, if we wanted prices that actually start to affect the behavior of some people who don't know how to reorganize their CO2 to pay nothing, the price of CO2 emissions would have to grow by an order of magnitude and dozens of percent of the world GDP would be thrown out of the window.

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