February 27, 2006
If you can't lick 'em
Instead of complaining about Kyoto adding 20% to the cost of energy in the EU, I should have been playing the future's market. Iain Murray writes in TCS Today about "The Kyoto Bubble."
It is well known that Enron was a keen enthusiast for limits on carbon dioxide emissions under the aegis of a cap and trade scheme, which would enable companies to trade permits for the right to emit carbon dioxide. Enron documents released to the public reveal that executives thought such restrictions would, "do more to promote Enron's business than almost any other regulatory initiative outside of restructuring the energy and natural gas industries in Europe and the United States." We can now see why. In Europe, such a scheme has been introduced, and the energy companies and their advisers are very happy."The carbon market is going very well. We've seen tremendous growth this year," Henrik Hasselknippe, senior analyst at Point Carbon, told Agence France Presse on February 12. "Carbon is now being used as a commodity on the same lines as other energy commodities." According to his estimates, CO2 trading will be a $40 billion annual industry by the end of this decade. The current price for a metric ton of carbon is $31, while a year ago it was $8. Others are equally bullish. Thierry Carol of Powernext Carbon, a CO2 trading market, told the same reporter, "Things are taking off. This is just a start."
" UBS itself concluded that there is a significant risk of a windfall profit tax being placed on the industry." Talk about full-circle -- whom would I root for if there were a windfall profits tax on greenhouse gas markets? I get dizzy just thinking about it.
I know we have some fundamental disagreements on global warming around here, but perhaps we can all agree that Kyoto is a bad idea? Oddly enough, the free-marketer in me loves the idea of cap and trade. But I would like to use it for real pollutants, not what plants breathe.