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Green new Deal!Climate Agendato enslave humanity. 

          In recent times, the environment has become a cause for concern with those on the pessimistic side fearing apocalyptic events as a result of global warming, while others are less concerned with some outright denying global warming exists. Environmental activists on the more pessimistic side of the spectrum have been vehemently pushing for action on the part of Governments. Views on global warming aside, it can be agreed upon by everyone that pollution is bad. Therefore people, industry, and government should keep from polluting. With that acknowledgement, it’s important to realize the aggregate of solutions being pushed by the likes of climate activists that made news recently, most visibly headlined by Swedish child activist Greta Thunberg are anything but a solution. In fact, you will go on to read about how the proposals of the generally sincere and well-meaning climate advocates is not a solution at all, and in fact serve to possibly harm the environment in the future.

The Proposals:

          There have been quite a few proposals intended to save the world from runaway global warming. Some proposals have been quite successful at gaining traction from the Paris Climate accord to the Green New Deal and most recently proponents of the Global Climate Strike that recently took place in late 2019 have a few common core characteristics. The aforementioned, at their root, request the elimination of carbon emissions. Fairly generous mandates of environmentalists ask for countries to reduce their emissions by a quarter by 2020 in order to prevent a 2 degrees celcius rise in global temperatures, any higher rise in temp (according to activists) could set off a series of chain reactions that will propel the earth towards a path of destruction that will be irreversible and beyond human controls. The climate movement seek intervention in the form of legislation from governments in order to achieve their desired reduction in carbon production.

          In order to facilitate the reduction of carbon emissions, there are two options currently being considered. The most direct option calls for a carbon tax, which would set a dollar-amount to be billed per ton of carbon emissions produced. The other option is cap and trade, which awards allowances for carbon emissions. In the cap and trade scheme, a marketplace is automatically created where some will not use up all the emissions that they are “allowed” while others will most certainly go past their allowance. Those that go past their allowance will have to purchase some of the unused allowance sold on the market by those that didn’t use up all their allotment. The European Union implemented cap and trade with the creation of the European Union Emissions Trading Scheme (EU ETS) in 2005, the top down plan issues allowances to EU member countries that award allowances to companies.

The Winners of Cap and Trade and Carbon Tax Plans:

Cap and trade and a carbon tax plan have numerous similarities, they both intend to use the power of capitalism to achieve their ends; it’s interesting to note that China, the communist nation responsible for more pollution per year than any other nation, has created an emissions market. While cap and trade directly creates a marketplace for carbon allowances, the implementation of a carbon tax will undoubtedly create a similar derivatives market as companies seek to hedge against volatility in costs that might be incurred in the future. In both plans corporations are forced to pay for a new expense but ultimately pass costs down to consumers and tax payers. The inclusion of a carbon expense on business balance sheets will undoubtedly result in the elimination of jobs and investment, perhaps in areas such as clean energy technologies, to offset the costs. There are winners of both scheme, such as green companies involved in activities such as planting trees perhaps; however few if any have as much to gain as the financial services industry. The financial services industry stands to profit massively from trading activities in the derivatives markets, especially futures.

Various entities and individuals have forecasted growth in the lucrative carbon market.  Enron and Goldman Sachs have both lobbied the Clinton and Obama administrations for the creation of a climate change industry in the U.S. The founder of the Chicago climate market and others have long forecasted carbon one day becoming the world’s largest (and most lucrative) market. The sentiment is one that is shared by legendary trader George Soros who stated in 2007 “The cap-and-trade system of emissions trading is very difficult to control and its effects are diluted…It is precisely because I am a market practitioner that I know the flaws in the system.” George Soros has always been a pioneer trader of new markets coming into existence as he came to prominence trading what was the newly created Forex industry that followed the end of the Bretton-Woods system. The world is already on a path towards a greener fossil free future with the advent of technologies such as nuclear fusion coming on board promising to deliver emission free limitless supply of energy to the world cheaply. New energy technologies don’t require input of commodities once on line as an added benefit makes them immune to the shock waves that have historically categorized the energy markets; shockwaves so great that they often changed the course of history as they propelled nations towards warfare as they looked to secure sources of energy. Financial firms have long thrived on the shockwaves and volatility of energy markets with their trading activities on markets such as oil during times of crisis, pushing prices paid by consumers at the pump way past what supply and demand would dictate, but not before collecting the difference as pure profit. A future without fossil fuel was a greater threat to firms used to profits from trading and market-making than they do to energy companies, as large energy companies have plans to pivot their business activities as required.      The prospect of carbon trading promises to replace the income streams of trading energy and greatly multiply them. It should come as no surprise that according to Bloomberg, wall street firms have volunteered to fund the controversial Green New Deal, pending congressional legislation of course. Carbon futures are unlike futures on something such as crude oil. Such contracts are based on an existing finite commodity that ultimately must be delivered (bar offset contracts). Those that wish to write physically settled oil contracts have to own the asset they wish to write a contract on, or put up funds to provide adequate liquidity in the advent there short positions go south. Even cash settled contracts are subject to the happenings of the asset they follow. Carbon futures whether they are based on allowances or those that would exist in a carbon tax system, unlike typical futures on energy are in essence based on liabilities. Unlike a contract on crude oil, which is a very useful commodity that has become a necessity, carbon futures are unnecessary. Even though oil or soybeans or metal are required for many applications, no one is required to purchase them and no one is forced to hedge against them. If the climate proposals being wheeled by activists who for the most part are sincere in there benign desires get their agenda legislated, companies and perhaps countries will have to buy contracts on a liability they don’t actually have and most certainly don’t need, on a market made by and administered entities that have no natural right to funds for not providing service. The experts in the financial industry with a more conservative and risk neutral view on investing, will have no problems essentially writing contracts on an intangible liabilities. The risk taking speculators such as Soros will possibly fare even better as their trading activities reflexively determine the prices of carbon, generating huge profits. The huge profits would ultimately be paid by consumers and tax payers without receiving anything in exchange. During the Iraq war, the effect of speculators was felt by everyday Americans as they struggled to keep up with rising gas prices, even when there was stability in the Middle East and no major changes in supply and demand had occurred. Speculation could lead to companies having to pay inflated dollar amounts on an expense that doesn’t actually exist, likely to result in many businesses being shuttered and jobs lost. Companies could of course hedge. Carbon contracts are complex, however only a simple understanding of the topic is required to see them for what they are --- extortion. Perhaps they should simply be referred to as extortion contracts in order to promote understanding among the layman.

Environmental policies being pushed by well-meaning protestors do little to fight global warming and help the fight against climate change. It is very likely that the majority of climate protestors have no grasp on the finer points of the policies they have agreed to lend their support to, nor is it likely that they understand the implications for their future. It is estimated that the modest agreements of the Paris Agreement would cost American households at least $20,000 per annum. The protestors, especially the young would not be safeguarding their futures, but instead ensnaring themselves to paying for something that does little to support the environment. Contrarily, the environment would be harmed as money that could have been used to create and improve sustainable technologies such as clean energy or carbon capture will instead be allocated to traders of extortion contracts.

The United States:

          The United States has long debated enacting cap and trade or legislating a carbon tax without implementing any measure. It is interesting to note that emissions in the United States has experienced a decline in emissions for many years with the exception of a brief spit in 2018; the decline in emissions is more remarkable since it coincided with a continuously growing population as well as the longest period of sustained economic growth In the nation’s history. The EPA chief under the Trump administration has been quick to point to the data as having “proven that federal regulations are not necessary to drive co2 reductions.” The decline in U.S. emissions is fueled primarily by technological innovations, while the shift towards natural gas for energy production has also helped. Companies are economically incentivized to create more and more fuel-efficient products that are more benign towards the environment, this can be seen in the Transport sector, the biggest polluter, as consumers look for efficiency in order to save money in addition to green concerns.

          Now CHINA on the other hand:

                   Find out on the next episode of Boogalations: 5.56

 

 

 

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Green new Deal!Climate Agendato