## Monday, September 24, 2012 ... /////

### EU carbon market will be saved by a new boom of coal

An hour ago, I saw a fascinating article on Patria.CZ, a Czech server for investors, which revealed a highly paradoxical, nearly comical plan.

Analysts at UBS are predicting that by 2015, energy giants such as E.ON and RWE will build lots of new coal power plants – in fact, their capacity will be 6 times greater than the capacity of previously preferred gas-based alternatives. That may send the price of carbon permits up by 73% by 2013. Note that the U.N.-based carbon indulgences' price, CER, dropped by 80 percent in the most recent year.

The new boom that is expected both in Western Europe as well as the post-socialist Europe is the only sensible way how the carbon market may be saved. Isn't it ironic? ;-) For the climate alarmists to preserve their institutionalized bare skin, they must do everything they can to force people to build new coal power plants. Such paradoxical events occur everywhere where planning trumpets the market. The plans – indefensible irrational arbitrary guesses – are almost never right or realistic which is why their champions often have to do many things, including things that manifestly make things worse, to preserve their face.

Note that Europe is already burning coal at the highest rate since 2006 which is great news for the U.S. coal exporters such as Arch Coal Inc.

Joe Romm actually informed us about a closely related insanity. You may now actually earn carbon credits in the "Clean Development Mechanism" if you build new coal power plants! ;-) It's enough for your new power plant to be "supercritical" which really means just some 10% increase of the efficiency. Note that the previous methods to earn the carbon credits were to murder farmers in Honduras and thousands of people in Uganda. So the United Nations support truly "humanitarian" causes.

All these insane games redirect billions of dollars, reduce the efficiency of the markets, and a part of these billions always ends up in the pockets of de facto criminals. Needless to say, the impact on the CO2 emissions is non-existent, not that I would care in one way or another. In fact, the United States that haven't been a party to any carbon credit trading have seen the greatest decrease of CO2 emissions in the world.

Capitalism is an engine that works. Caps, plans, carbon markets, and climate alarmists are dirty sand in between the wheels that tries to stop the engine.

And that's the memo.

#### snail feedback (4) :

reader Michael said...

The czech article misinterprates the facts. EOn and RWE will build new coal powered plants to dispose old coal powered plants with a higher carbon output per generated electrical power. The german conversion to more renewable power generation makes fast starting

COmbined Gas And Steam (COGAS) powerplants necessary together with smart very flexible energie nets and long distance power lines to transport the wind generated energie from the north sea till to southern germany.

reader Luboš Motl said...

Dear Prof Michael, your clarifications just make me smile. To build a power plant, and/or to abandon a running one, isn't for free. It seems implausible that a commercial company will be building new plants and demolish older, fully operational ones just in order to save 10% of some very cheap fuel. It makes no economic sense. It makes no environmental sense, either. None of these companies has a huge profit margin so that it could waste money in this way.

There is absolutely no reason to think that E.ON and RWE will decrease their consumption of coal. Of course they won't because there will be enough demand for energy. It's meaningless to "identify" some new plants with old ones so that the new ones "replace" the old ones. There's no reason to start a new one exactly when an old one is turned off and it's usually uneconomic to synchronize it in this way.

COGAS is just a name of a currently popular combined cycle. It doesn't change anything qualitative about the production of electricity and it doesn't change the basics of economics – e.g. that it's a waste of money to retire old power plants way too early.

The main problem with the wind energy isn't just the transport of the energy; the main problem is the irregularity of the production.

reader cynholt said...

No need to get all worked up about this, Lubos, Apple is going to
produce enough shiny white gadgets to reflect the Sun's radiation and
end global warming.

Of course, that will start a new ice age, but think of the market share in iSnowshoes, and iDogsleds! It's a whole new paradigm.

If you liked Apple at $700 a share, you'll love it at$1400. ;~)

reader John F Hultquist said...

Michael says “and long distance power lines”

Does he mean like the Pacific DC Intertie:

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