Ozymandian Overreach

Folly and Arrogance Lying in the Dust

We expect that the carbon emissions trading scheme will eventually be consigned to history’s dustbin amidst much derision.  It was always nothing more than a portentous Canute-like attempt to restrict carbon emissions–that is, of holding back the inevitable.  The brutal truth is that there is only one way for human beings to stop emitting carbon into the atmosphere and that is to regress economic production.  The global recession has done a pretty good job of that.

Consequently the European carbon emissions trading scheme is in trouble.  This from The Telegraph:

The European Commission has moved to fix the EU’s sickly carbon emissions trading scheme (ETS), as certificates fail to find buyers due to the recession. “Is it wise to continue to flood an already oversupplied market? Clearly not,” said Europe Union energy commissioner Connie Hedegaard on Twitter. “That’s why (we) propose to change the auction time profile.” Brussels proposes a delay or freeze in auctions of the certificates from 2013 to 2020 to prop up sagging prices.

Here lies one of the great follies of the modern world.

To will oneself to greater poverty just ain’t going to happen.  So the doomsayers and the Greenists persuaded a gullible West (which long ago ceased to believe in God and thus now believes in anything) that economic growth needed to be reconfigured to non-carbon emitting paradigms.  The greatest amongst these was “green energy”.  The central mechanism to achieve this was a carbon emissions trading scheme.  It was hailed as an enlightened and advanced move because it deployed market forces of supply and demand to change behaviour.  All well and good–as long as the thing traded had genuine (rather than artificially created) supply and genuine demand.

Here was the rub.  It did not.  Therefore governments had to “create” demand and supply.  The tool of choice to do this was to tax human beings and businesses that emitted carbon by requiring them to purchase carbon credits (thereby creating forced demand).  They would be able to purchase these credits from people and businesses which were granted artificial credits by the stroke of a legislative pen.  These “credits” were given out for lowering or reducing carbon emissions, or just not being in the business of generating many carbon emissions.  Naturally, some businesses such as accounting and legal practices would get lots of credits since they did not use much energy.  They could sell these to buyers such as oil refineries that did give off lots of carbon emissions.  Money for jam.(No wonder, incidentally, that most accounting and legal firms became early cheerleaders of the establishment of the scheme.  They could smell the “free money”.)

Here’s the problem: there are huge incentives to create emissions.  It was free money after all.  But huge resistance to having to buy them.  No-one like to pay tax–and carbon emitters knew a tax when they saw one.  Therefore, it became economically sensible not to expand their businesses.  End result: an oversupply of carbon credits, driving down the price of the credit.  Market forces have been at work and the market is a ruthless master. 

The price of carbon credits in Europe has plummeted.

Prices on Wednesday were at seven euros ($A8.31) a tonne in comparison to the 24 to 30 euros needed to invest in renewables. 

So, it’s as dead as the dodo.  But if governments can create these things with a Canute pen, they can interfere and change the rules.  Too bad for all those businesses that engineered their production and operations to create carbon credits.  The European Community now plans to shut the market down until 2020.  Dumb and dumber.  If Europe closes up the market by the wilful act of those-who-would-be-as-gods it will diminish the credibility of the market to such a point it will likely not survive. 

Imagine how many investors would flock back to the stock market if the government decided for its own political goals to shut it down for eight years.  Markets, if they function at all, can only do so if integrity underpins them: truth about the assets being purchased and integrity about contracts to buy and sell.  Shutting the market down by gross political intervention destroys both. 

One more inanity: if the market is frozen as proposed, it is estimated that the price of carbon would rise to around 15 euros a tonne–still well below the price needed to justify investment in those oh-so-desired renewables.  

Ah, the folly of fallen man living in arrogant rebellion against the Creator.  His wrinkled lip and sneer of cold command will, like Ozymandias, lie in the dust for the edification of future generations. 


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