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by I'm about to describe two homes, one belonging to the Oscar-winning former Vice President and star of An Inconvenient Truth Al Gore, the other to President George W. Bush. Can you tell which home belongs to which person?
House #1 consumes nearly 221,000 kilowatt-hours (kWh) of electricity per year, more than 20 times the national average of 10,656 kWh. Last August alone, this house used 22,619 kWh, consuming more than twice as much electricity in one month as the average American family uses in an entire year. Also, the natural gas bills for this 10,000 square-foot 20-room mansion and guest house averaged $1,080 a month last year.
House #2 contains only 4,000 square feet, has 25,000 gallons of rainwater storage, gray water collection from sinks and showers for irrigation, passive solar, and geothermal heating and cooling. The system uses no fossil fuels such as oil or natural gas, and consumes 25% of the electricity required for a conventional heating/cooling system.
If you said house #2 must belong to Al Gore-- you'd be wrong! Al Gore is the owner of house #1, while house #2 is President Bush's Crawford, Texas residence.
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Apples and oranges by scottb :: NR7 :: on 29 March 2007
You're comparing the primary home of a wealthy man with the vacation home of another. Bush hasn't lived in Crawford for years. For the last six he's been in the White House, for the six before that, he lived in the Texas Governor's mansion.
Also, the implied argument is "look at what a hypocrite Gore is" - but Gore isn't saying "hey, emit less carbon, like me", he's saying we, as a group need to control carbon emissions, and the best way to do that is by treating the right to emit carbon as a limited resource. By buying carbon offsets in an amount corresponding to what he emits, he's doing exactly what he preaches.
RE: Apples and oranges by LordDilly :: NR8 :: on 29 March 2007
By buying carbon offsets in an amount corresponding to what he emits, he's doing exactly what he preaches.
Ironic that a dude who hates Christianity so much puts any stock in some rich dude buying what amounts to environmental indulgences. If Gore actually believed what he is saying, he'd do something other than paying other folks to reduce his pollution. It's insane! We, the unwashed masses are expected to to the hard work of preventing the coming environmental Apocalypse while Gore is actually polluting even more since the release of An Inconvenient Truth but it's okay 'cause I'm buying indulgences....er...carbon offsets. The Tennessee Valley Authority just installed fifteen new wind machines in the Buffalo Mountain site, bringing that site's production to 29 megawatts of electricity, enough energy for 3,780 homes. Of course, the average home is 2,300 square feet, not 10,000. And since this is a zero-sum game, Gore's mansion is essentially squandering the green, plus (supply and demand) bringing up the cost of green energy for Joe and Jane Schmoe. Gore is the worst kind of hypocrite- the rich kind who can afford to reverse engineer (or whatever) his phat ass mansion to make it a helluva lot greener. Imagine if he massively reduced his carbon footprint and bought carbon offsets equal to his old polluting self-- that would mean he actually gave damn.
RE: Apples and oranges by scottb :: NR7 :: on 29 March 2007
So if the issue is that carbon "indulgences" aren't an effective solution, argue that - I happen to disagree, but I'm no expert on the subject.
What you've made is a thinly disguised ad hominem attack, not an argument that's relevant to the global warming debate.
RE: Apples and oranges by LordDilly :: NR8 :: on 30 March 2007
I'd almost say this is an aside to the Global Warming debate, which is another topic in and of itself. This is about the character of a professional politician who has taken it upon himself to become the central figure in the Global Warming debate and expects the rest of us to give him deference in the matter, apparently because he was the VP for eight years. On the one hand we have President Bush, whom (or who--stupid grammar) gets no credit from the media for doing anything at all for the environment, yet has a very Eco-friendly house. Your argument that it isn't comparable to Gore's is weak, at best. Bush spends a lot of time at Crawford, and after his term is up, will probably live there full time. Also, Bush isn't running around flailing his arms screaming about the coming environmental Apocalypse. On the other hand, Gore is running around flailing his arms screaming about the coming environmental Apocalypse, telling the American people that they have to do something!! But all Gore does is pay someone else to do something, very much akin to Medieval Royalty who wanted to go to heaven but didn't actually want to stop sinning, so they paid for indulgences from the church.
As I said in a previous post, if Gore has the money to both run an obscenely high electric and natural gas bill and pay for someone else to plant trees or whatever, than he surely has the money to make his mansion energy efficient. How can he tell us to care and do something yet do nothing himself? I could understand buying carbon offsets to cover pollution that is all but unavoidable-- jetting across the country in his private jet, for example-- but he does nothing. I'm just Joe Schmoe of the Unwashed Masses, yet I probably do more actively than Gore-- we use a wood pellet stove for our primary heat, thus barely using our oil furnace, we separate our garbage, I drive a Honda Civic and keep it maintained, and I conserve electricity. Had I the money to make substantial infrastructure changes to my home, such as solar panels and whatnot, I would. I also don't have the money to pay someone else to do something for me.
RE: Apples and oranges by ldsudduth :: NR7 :: on 30 March 2007
Nick, I couldn't agree with you more. As wealthy as Al Gore is, he should be setting up his home as *the* model for sustainable, renewable resources. Leaders should not ascribe to the 'Do as I say, not as I do' model.
I live in an apartment; so I'm at the mercy of what the building owner will or won't do. However..that being said, I do my best in other ways. Lights get turned out when not in use, the computers spin down when not in use (no, I don't turn them off, because I access them remotely from time to time). I don't drive a Honda Civic; because I have two children, but I have a very fuel-efficient 4-door sedan. I separate garbage as much as I can.
As an extremely avid angler, I would like to direct everyone who thinks ethanol is a viable solution to our energy and greenhouse gas emission problems to this article. It addresses the myriad of problems from corn-based ethanol production primarily, but does mention cellulose ethanol in conjunction with the Conservation Reserve Program, which 'banks' acres of land for future need/use in agriculture. There are even negatives to celluolosic ethanol.
With all of the problems we will be facing soon in getting clean, fresh water--is this a viable solution either short or long term? I like what the article concludes with:
Novel concept--double the fuel efficiency of our automobiles (and along with that boats, planes, trains, etc.) and cut petroleum consumption by 33%. Along with that, I'm sure it means cutting Greenhouse Gas Emissions as well. I'm not certain, however, that Agribusiness, Oil, and Vehicle Manufacturers would like that idea.
RE: Apples and oranges by scottb :: NR7 :: on 03 April 2007
As I said to LordDilly - I think your logic is flawed. You say Gore shouldn't ascribe to the "do as I say not as I do model" and that he "should be setting up his home as *the* model for sustainable, renewable, resources".
I say, he's doing exactly that.
It's you (and apparently LordDilly) who seem to think that what he should be doing is reducing his own carbon production, but that's not what he's saying we should be doing.
His position isn't focused on gross carbon production, but net. He's saying, "look, we don't have to live like cavemen, or even tree-huggers on a hippie commune somewhere - we can enjoy the benefits of the modern world, but we have to properly compensate for the effects of that". To that end, he proposes to better incentivize people and businesses to become carbon neutral with a trade in offsets.
The proposal is essentially to decide what our "budget" is for carbon emission. We can make it bigger by planting trees or other "net negative" activities. We use it up with our emissions. We harness this whole thing to the engine of capitalism - by dividing our carbon budget into "shares" (a.k.a. "offsets") and auctioning them off. In order to have a net positive emission, you have to buy the rights to do so. Anyone with at net negative emission effectively gets some free shares they can sell.
This gives businesses the incentive to reduce their emissions (because they'll have to buy fewer offsets), or even create net-negative operations. As a society, we get to control our net contribution to the problem.
Now, I happen to think the basic plan is sound. I don't know enough of the details of his specific proposal to know if there's some real obstacle to implementing it, but the basic idea sounds great.
You may disagree - and that's certainly your prerogative. But it's wrong to cast Gore as a hypocrite when he's doing exactly what he says. His home's emissions may be high - but he offsets that by effectively paying for the cost of undoing the damage.
He is doing what he says. And he has made his house into precisely the model he proposes for sustainable, renewable resources - zero net emissions.
RE: Apples and oranges by ldsudduth :: NR7 :: on 03 April 2007
He is doing what he says. And he has made his house into precisely the model he proposes for sustainable, renewable resources - zero net emissions.
I don't necessarily disagree completely with you--but eventually the 'carbon offsets' are going hit a point of zero net effect. Someone, somewhere is going to need to do all of the things necessary to actually reduce their net emissions; not just 'buy' an offset. Since Al Gore is not exactly poor, why couldn't he use his home as a model for making *all* homes highly energy efficient, which would give him offsets he could 'sell'. Then, encourage builders to create similar homes; which would give them offsets they could sell, and those who buy those homes would have have offsets they could sell, or use to reduce the cost of their loans. The effect could snowball until, eventually, a majority of every home, building, car, boat, plane, train, etc.. is creating offsets. I know that there will be millions of homes, buildings, vehicles, etc. out there who will need those offsets, until/unless they are replaced or modified. This is where those 'offsets' would help. How about some low-interest loans for people who own their home and want to modify them to make them more efficient? Tax breaks are great, but some people need a way to remake their homes.
I would agree that we can live in and enjoy the modern world and not emit greenhouse gasses. I just think that those who propose to lead should lead by example; especially when money isn't really a deterring factor. I read where he's starting to do that, and I actually applaud him. Now, about that zinc mine...
RE: Apples and oranges by scottb :: NR7 :: on 03 April 2007
Someone, somewhere is going to need to do all of the things necessary to actually reduce their net emissions; not just 'buy' an offset.
The thing you seem to be missing is that there aren't an unlimited supply of these offsets to be bought. Someone has to sell them, and to do so they have to actively remove pollution from the air. Almost nobody is currently in the business of actively doing that, because there's no money in it.
Al Gore wouldn't achieve a damn thing by converting his house to be zero-gross emissions. Even if he did so and were praised to the skies over it (which certainly wouldn't happen), and even if it motivated lots of people to want to do the same, most couldn't afford it, and most simply wouldn't do it.
What's missing isn't someone acting as a model for zero-gross-emissions. What's missing is a system that gives people real incentive to change. The world emits some 24 billion tons of CO2 each year. The US about 20% of that. It's virtually impossible for there to be enough carbon-offset providers to compensate for that. But that's exactly what drives this system to work.
If we want to set a goal for, say, a 10% reduction in CO2 emissions by 2010, the government allocates 4.5 billion tons of carbon offsets for that year, which it sells at auction, much like a T-bill. Any carbon-offset providers add to that offsets that total whatever they're removing from the air. Anyone who emits more than they have offsets to cover faces fines much higher than the cost of an offset.
This creates a very strong incentive to meet that emissions goal. Shifting focus to an individual manufacturing business, the business owners will have some idea of what the offsets necessary to cover their plant's emissions will cost. This gives them a very concrete cost-benefit decision to make: pay for the offsets or find some way to by fewer offsets by reducing emissions. The fixed number of offsets in the auction mean that the price will be such that some businesses will find it makes business sense to convert their plant to emit less. Since there are 10% fewer offsets than there is pollution in the status quo, the price of those offsets is going to be quite high. Economic theory even suggests that they'll be exactly high enough to force a net 10% reduction in emissions - enough people will find ways to reduce their emissions that are less costly than the fines they'd face for emitting without offsets.
One rich guy that half the country hates converting his house to zero-gross-emissions isn't any kind of solution to the problem. But calling him a hypocrite when he's doing exactly what he proposes makes good political camouflage for big, polluting businesses that don't want to pay the high cost of their actions.
RE: Apples and oranges by Brandon :: NR9 :: on 03 April 2007
I think this plan makes a lot of sense. It is appealing to the basis of our economy (capitalism) to enact change, and that's what works best (in my opinion).
The odd thing is that I had to hear the details of this plan from you. I just recently watched Gore's movie, but there was no indication of this sort of way forward. Really, the only thing I got from the film was: Global warming is a problem that needs to be fixed. Perhaps he's shooting a sequel to propose his remedy?
RE: Apples and oranges by scottb :: NR7 :: on 03 April 2007
The odd thing is that I had to hear the details of this plan from you. I just recently watched Gore's movie, but there was no indication of this sort of way forward. Really, the only thing I got from the film was: Global warming is a problem that needs to be fixed. Perhaps he's shooting a sequel to propose his remedy?
The movie was released in January of 2006. It's basically a documentary of Gore's efforts on behalf of the global warming issue during the time they were filming, which at a bit of a wild guess was probably something like mid-2004 through mid-2005. At that time, the entire focus of the debate was on whether global warming was even a problem. So it's not surprising that's the focus of the movie.
Since that time, the discussion has shifted - there's an emerging consensus that global warming really is a problem and we're now really starting to talk about solutions.
Just yesterday, the Supreme Court handed down a decision that takes the Bush administration to task - particularly the EPA - for political maneuvering at the expense of the environment, particularly global warming.
The carbon offsets have been in Gore's message for a while - that's why he buys them. That's why he refers to them in response to these accusations of hypocrisy. But nobody seems to want to look to see what they're really all about. We just keep saying "look at the hypocrite with the big gassy house."
I suppose you could also argue that the ideas behind the carbon offset are pretty sophisticated and they could be over the head of the average Joe. After all, one in five American adults think the sun revolves around the Earth. Fewer than 1/3 can identify DNA as key to heredity. Only about 10% know what radiation is. The average Joe lacks a lot of the background knowledge that's needed to really evaluate an idea like carbon offsets.
That kind of leaves it to us nerds, though. Instead of playing into false arguments like "Gore is a hypocrite", we need to really understand what these people are really on about and help the less nerdy figure it out.
Statistics by Anonymous :: NR0 :: on 03 April 2007
I suppose you could also argue that the ideas behind the carbon offset are pretty sophisticated and they could be over the head of the average Joe. After all, one in five American adults think the sun revolves around the Earth. Fewer than 1/3 can identify DNA as key to heredity. Only about 10% know what radiation is. The average Joe lacks a lot of the background knowledge that's needed to really evaluate an idea like carbon offsets.
Do you have link for these statistics. They seem so unbelievable, but I fear they might actually be true...
Thanks.
RE: Statistics by scottb :: NR7 :: on 03 April 2007
Do you have link for these statistics. They seem so unbelievable, but I fear they might actually be true...
I grabbed 'em from here.
RE: Apples and oranges by ldsudduth :: NR7 :: on 09 April 2007
On the subject of buying/selling carbon offsets I found a news commentary on [Fox News that sums up the profit part of all of the efforts to mitigate the human contribution to global warming.
RE: Apples and oranges by scottb :: NR7 :: on 09 April 2007
Well, as I said before, I think there are still big obstacles to making a carbon offset system work. I've been more trying to explain it here, more than I've been trying to defend it.
In general, though, the fact that there's money involved in all of this isn't intrinsically a bad thing - it's what's supposed to make it work.
Viewed from a high level, the way it's all supposed to work is that the "cap-and-trade" system sets our national goal for emissions. Currently, we emit about 5 billion tons of CO2 each year. So if we want to set a goal of zero growth, the government would create a pool of 5 billion tons of offsets. If we want to reduce by 10%, we create a pool of 4.5 billion tons. This pool is auctioned off by the government.
Any organizations that actually remove CO2 from the atmosphere - carbon sequestration or whatever - is granted an equivalent number of offsets beyond the basic pool representing our goal. They own them and can sell them or keep them as they choose.
Now, these have to be linked to behavior, so every ton of actual emission has to be paired with an offset owned by the emitter. Any emissions not paired with an offset have to result in sufficient sanctions to make it not worthwhile - the obvious choice being fines that are substantially more than the price of an offset.
Now, looking at where all the money ends up going: there's a pretty huge chunk that goes to the government, becoming national revenue - reducing taxes or whatever, and there's money that goes to anyone who removes carbon and sells their offsets.
When you star looking at things like the Fox News article mentioned they're not intrinsic to the system. There's no inherent reason that these things should be traded on Wall Street. They're basically government instruments like T-bills. If the government wants Wall Street to actually manage the auction, then they presumably would make some money off of it. Plus there's some inherent uncertainty in the total number of offsets any entity needs in a given auction period - if they over- or under-buy, then presumably they'll need to make corrections by buying and selling in a secondary market, and those trades might end up being mediated like the current stock market.
"Credits" for reductions already taken don't make sense. They sound like a purely political move. The goal is to reduce future emissions - the reductions that companies like Dupont and Alcoa have already done are reflected in the fact that they don't need to buy as many offsets as they would have without the reductions. Solar and wind energy firms already benefit in the system because their competition - fossil fuel burning energy firms - will have to buy very many more offsets than the "clean" energy firms, and those costs will have to be passed on to the consumer, making fossil-fuel energy more expensive.
And I really don't get the issue about "crowding out the environmentalists". They get the big win by cleaning up the environment. The whole point of this system is to create incentives to reduce emissions. Incentives mean money - so the whole point is to make it cost real money to pollute. That money has to go somewhere. In the ideal scenario, that money goes to "the people" - all of us - because the offsets represent the right to damage something we all hold as a common interest, the atmosphere.
Again - none of this is intended to defend the idea, it's really just to explain it. There are some key issues that the general idea doesn't really address, and any particular implementation can easily screw them up.
As a really basic example, working out how we assess carbon output will be likely be an awful political mess. Polluters will lobby very hard to make the estimating rules underestimate their output as much as possible, while environmentalists lobby to make them overestimate.
As another, when you've got a business like a coal-burning power plant, virtually the entire block of carbon offsets the business needs to buy go to one thing. But for most businesses, and especially for individual consumers, their emissions are spread over a lot of different activities. In theory, we'd have some way to total them all up and just buy the necessary offsets, but in practice, it almost always gets pushed farther upstream - both to make it easier on the consumer and to ensure compliance.
So, to offset a car's emissions, the car owner needs a block of offsets. Presumably, they're purchased as part of registration fees or emissions testing or whatever. On the other hand, with something like a barbecue, there's no obvious recurring transaction to which they can be attached. Rather than having a "barbecue tax", maybe we estimate the expected average output of the barbecue over its normal life and require barbecue sellers to own the corresponding offsets before selling it. But once again, this introduces an area where lobbying efforts can screw with the system.
I think there are a whole bunch of little things like this that can confuse the issue and make it highly politicized - at the expense of the effectiveness of the system.
But I still think it's worth talking about and understanding systems like this, rather than just dismissing them out of hand.
RE: Apples and oranges by ldsudduth :: NR7 :: on 09 April 2007
I agree they need to be understood and discussed, but with the petitions from Goldman/Sachs and the rest of Wall Street, this will turn into a huge scheme to make money. One of your earlier comments discussed something about 'auctioning' off Carbon Offsets like T-Bills. My concern is that they will turn into another form of 'Stock Market' or 'Futures Market', where the cost of each 'share' will probably sell/trade for far more than its' intrinsic value.
The reason the environmentalists are being crowded out is because rather than use this 'offset' system, they want the EPA to mandate and enforce Clean Air Regulations. A decade ago they were the only ones clamoring for these regulations. Now, the financial market is clamoring for it--and they actually have the economic clout to acheive what environmentalists could not.
My fear is that these 'Carbon Offsets' will end up costing the consumer far more than it should. I fear we will not only bear the brunt of the cost to pay for the equipment companies will use to make the reductions; as well as for the costs related to buying the offsets for those companies unable/unwilling to reduce carbon output. I also fear we will bear the brunt of the cost of reduced taxes to businesses that are making the effort to reduce carbon emissions. This system will create clean air, with the end result of divesting more of the consumer's income and making companies selling the offsets wealthier; as well as those companies in the middle acting as brokers for the offsets, like a Goldman/Sachs. The companies buying them are also going to want some sort of 'incentive' to buy them; making it a win-win for everyone but the consumer.
My concern is what the eventual cost is going to be. We're already seeing a huge rise in the cost of corn due to increased demand for its' use as alternative fuel. Other alternative fuel sources that are proven to lower carbon output will not be far behind. In fact, Corn is up 34% in the last 6 months alone. This has caused a nearly 29% increase just in the cost of eggs. They're expected to settle a bit, but ultimately grow 15% for this year. Of course, this is dependent upon the demand for Ethanol, but I'm sure that demand will remain. Nearly the all of the alternative fuels are currently made from the same grains that we feed cattle, chickens, hogs, and ourselves with. Add to the cost of animal feed rising (which will ultimately touch every product, one way or another, we will also get a food shortage. What is to stop companies from making substantial price increases to offset their losses? or, conversely, getting tax 'incentives' to reduce the cost of making the necessary improvements. This can only result in one thing; the government will not stand to see its' coffers drying up. so the end user taxes will need to be increased by the government.
This should just be about laws and consequences--substantial financial consequences--for failure to follow the law. We shouldn't make this a market economy device, but rather as a way to 'reward' those companies who actually make sacrifices to make the environment cleaner. Those sacrifices should eventually profit the company making them (through tax breaks) but it should also be used as a form of 'punishment' for those companies who refuse to reduce emissions. We shouldn't let them pass this cost down to consumers---at least not enough for them to make a profit.
RE: Apples and oranges by scottb :: NR7 :: on 10 April 2007
One of your earlier comments discussed something about 'auctioning' off Carbon Offsets like T-Bills. My concern is that they will turn into another form of 'Stock Market' or 'Futures Market', where the cost of each 'share' will probably sell/trade for far more than its' intrinsic value.
Actually relatively few stocks trade for far more than their intrinsic value. There's some artificial inflation in certain tech stocks, like Google, but most trade quite close to any reasonable judgement of their intrinsic worth. As far as I understand, the artificially high price on Google and similar tech stocks is because there's an excess of investors who invest in Google as a proxy for investing in the 'net in general - which it's not.
The auction itself isn't the real problem. All it really does is introduce the offsets into the market at a price that the market determines is "fair" (that's what auctions do - people pay corresponding to what value they think they can extract from the resource).
Let's assume that auctions are held annually. Moreover, assume that everyone can correctly determine the amount of carbon they'll be emitting in the next year based on the activities they want to do - that's unrealistic in practice but we'll come back and adjust that assumption later.
So each player in the market knows how much they'll emit if they can get the offsets, they know what their minimum possible emission is even if they can't buy any offsets - these together determine the value of a given number of offsets to each player. Maybe there's really no way for me to emit less than 4 tons, so if I can't buy 4 tons of offsets, I'm going to get stuck with fines, but there's no way around that. But to get down to 4 tons, I'll have to replace my car with a more efficient one, and maybe replace some appliances or do other work on my house. I can afford all of these things, but there's a cost. So I have a range of emissions - 4 is the minimum, but maybe 12 is my "optimum" (in the sense that 12 would be my output if the offsets were free). So without offsets, I can say how much it would cost me to get to any particular output from 4 to 12 tons.
So everyone in the market does these calculations and comes up with a minimum and optimum value. We assume that the government sets the total available offsets to be at least large enough to cover the sum of everyone's minimum - they're being too ambitious otherwise. Now, if the total available offsets is more than the some of everyone's optimum, then the price for offsets will be quite low. The farther the total drops below the total optimum, the higher the price goes.
This is all just basic economic theory. I'm no expert, so if any "real" economists are listening in, feel free to jump in here.
The end result of all this is that the sale price of the offsets automatically converges on a "fair market value". It literally represents what the overall community thinks they're worth. This is part of the economic magic of auctions - the theory behind them is pretty interesting. Check the Wikipedia article for a basic overview.
The problem is that the auction won't "magically" set the fair price unless everyone has good information. In this particular situation, people can't (and even if they could, most wouldn't) accurately estimate their possible emissions profiles (minimums, optimums, costs, and so on). So some players naturally end up under-buying, and some over-buying. Since the offset is only worth something during the year it was sold, anyone who over-buys ends up losing money. But anyone who under-buys is facing fines. So the under-buyers are willing to buy the excess from the over-buyers. The most an under-buyer is willing to pay is whatever the fine would be. There's no minimum price that the over-buyer should be willing to accept, since they're worthless at the end of the year. So they should be able to agree on a reasonable price in the exchange.
The last complexity thrown in the mix is someone who's got some spare money to invest and chooses to intentionally over-buy on speculation, hoping that he'll be able to get a better price near the end of the year when some under-buyers are facing fines. Since he risks losing the entire investment if he can't find a buyer, the end result should be that he sells them for pretty much whatever the fair price is.
So I think the whole auction system should result in fair prices without turning into an out-of-control stock market. Again, I'm not at all a finance guy, just a math geek, but part of what makes the stock market do weird things is because there's a cost to trading over and above the actual price of the stock, in the form of broker's commissions. If you eliminated those commissions, then the stock market prices almost automatically reflect all the information the combined investors know about the value of what's being traded. But the commissions effectively suck money off the total value of the market, so the market has to continually produce new value just to remain in equilibrium. This, and the fact that a stock doesn't disappear after a fixed period of time, means the offset market will almost certainly be more efficient than the stock market.
Now, the financial market is clamoring for it--and they actually have the economic clout to acheive what environmentalists could not.
Sure, but what's so bad about that? If it cleans up the air, the environmentalists should stop whining and chalk one up in the win column.
I fear we will not only bear the brunt of the cost to pay for...
Some of these fears are justified. If the process of setting up the market doesn't focus on the real problem, and gets all wound up in "compromises" (meaning excuses for some players to ignore the rules), then we'll have problems.
The issue isn't about anyone being unwilling to buy the offsets, though. Anyone who emits carbon in excess of the offsets they own should be paying fines that are substantially higher than those offsets would have cost. That creates the incentive for everyone to play.
Nor is it about making the companies selling the offsets wealthier. It's the government - that is, it's us who are selling them. The proceeds ultimately end up as public money. Any sane government would skim a bit off the top to pay for running the auctions, take another chunk to fund research into new technology for reducing future emissions, and the rest would go to reducing the deficit and eventually reducing income tax.
We're already seeing a huge rise in the cost of corn due to increased demand for its' use as alternative fuel.
It's important to distinguish between "price gouging" and "natural" price increases. It's perfectly normal, and proper, for prices to go up as demand increases and for them to go down as demand decreases. The basic theory behind this "law of supply and demand" (which I'm sure you've heard of) is that they balance each other. The demand for corn went up (because of its new use as alternative fuel) so the price naturally goes up - there's not as much corn to go around, so those willing to pay more get it. But with the price higher, it's more profitable to grow corn, so more farmers grow it, which increases the supply. Once they've increased the supply enough to cover the new demand, the price starts dropping again. Because of that feedback, the supply and demand keep a kind of natural equilibrium.
But we occasionally see situations where unusually supply-chain problems create a temporary shortage. Sellers who see this coming know that prices will go up, so they boost prices even beyond what the natural feedback loop would do. You end up seeing situations like what happened to gas prices right after Katerina.
But it's important not to lose sight of the big picture here. The demand for corn as an alternative fuel has driven up prices. Corn as an alternative fuel isn't cheaper than gas, but some people are willing to pay extra because of the environmental impact. They value corn more. If corn is more valuable today than yesterday, that's reflected in the price.
The same is true of the big picture with the carbon offsets. They make prices go up - but if the market is operating efficiently, they go up exactly the right amount to pay for the reduction in emissions they produce.
This should just be about laws and consequences--substantial financial consequences--for failure to follow the law. We shouldn't make this a market economy device, but rather as a way to 'reward' those companies who actually make sacrifices to make the environment cleaner.
See, I think this represents a fundamental understanding of economics. Companies don't "make sacrifices". Companies have no moral code - they're not people, they're machines that have the sole purpose of making money. Corporate officers have a legal obligation to act in the "best interests" of the company and any action that reduces profits is almost certainly not in the best interests of the company. The officers are basically legally required to be greedy.
Viewing this as a "reward" and "punishment" problem is a category error. Companies follow money. If it costs less to emit than to reduce emissions, they'll emit. Punishing them for it does nothing. They still end up passing those costs on to customers anyway. It's only if the resulting increase in price ends up hurting profits enough that the company does anything different. The most effective way to make this happen is to directly connect the cost of emissions to the emissions themselves, and that's what the offset system is supposed to do.
We shouldn't let them pass this cost down to consumers---at least not enough for them to make a profit.
Why would passing the cost down to consumers let them make a profit? Profit is what's left after you've paid your costs. An increase in costs means an increase in price, but no increase in profit. It normally decreases profit, because there's a corresponding drop in sales that results from the higher price - supply and demand.
RE: Apples and oranges by ldsudduth :: NR7 :: on 10 April 2007
The demand for corn went up (because of its new use as alternative fuel) so the price naturally goes up - there's not as much corn to go around, so those willing to pay more get it. But with the price higher, it's more profitable to grow corn, so more farmers grow it, which increases the supply.
And I addressed this particular issue here. Growing corn is bad for the environment; it's not the panacea it purports to be. We have to be honest with each other about the entire picture.
The auction itself isn't the real problem. All it really does is introduce the offsets into the market at a price that the market determines is "fair" (that's what auctions do - people pay corresponding to what value they think they can extract from the resource).
I'll agree with you--but add this caveat: The value one *thinks* one might extract can be an arbitrary number. But, does this mean that the value of a vintage comic is really in the thousands of dollars? Or, that the value of a particular painting is in the millions? No, it's a 'perceived' value.
By allowing trading companies to profit from these carbon offsets; the value will most certainly be far more than their actual worth.
I'm not concerned about the selling of the Carbon Offsets and consumers paying for them; I know this will happen and frankly I am ok with it. Companies are not moral; if they were, they would have already taken care of the Greenhouse Gas emissions. I just don't want that cost to be artificially inflated beyond the real value. That is where my fear lies.
RE: Apples and oranges by scottb :: NR7 :: on 10 April 2007
Growing corn is bad for the environment; it's not the panacea it purports to be.
I'm not contesting that. Just questioning its relevance.
I'll agree with you--but add this caveat: The value one *thinks* one might extract can be an arbitrary number. But, does this mean that the value of a vintage comic is really in the thousands of dollars? Or, that the value of a particular painting is in the millions? No, it's a 'perceived' value.
All value is "perceived". There's no way to say what the value of a particular object is except to ask what someone is willing to pay for it.
The examples you give just highlight the subjective nature of value. What I'm willing to pay is generally different from what you're willing to pay. There's no "absolute" value.
It's a logical error you hear all the time - go to a local carnival and hang out near where they sell "fried dough" (or your local analog). You'll almost certainly hear someone say something to the effect of, "$2.50 for that? It's a few cents worth of flour and oil! What a ripoff!"
The sale price of something has almost nothing to do with the cost to manufacture it. If it costs more to manufacture than you can get by selling it, it just means you're better off not making it. The sale price reflects how badly people want it, not what it costs to make.
Every economic trade (purchase, barter, whatever) comes down to one fundamental question: is what you get worth more to you than what you have to give up? When you go to the gas station to fill up the car, you've decided that the tank of gasoline is worth more to you than the money you pay.
Same is true when someone buys a vintage comic for a few grand. That person would rather have the comic than the cash. The seller would rather have the cash than the comic.
When I mentioned "the value one thinks one can extract", I wasn't talking about a resale value. When I buy food, I'm not thinking about reselling it - I extract value by eating it.
I don't own a car. I don't think there's a car on the market that's worth what they ask for them. Between the purchase price, insurance, gas, repairs, and so on, I can't be bothered. I value the $40k more than the car. I happen to live in a city with a really good subway system, and I pay a bit extra to live close to a subway stop, and between the subway and the occasional cab ride, I almost never wish I had a car. I just can't see myself extracting $40k worth of value from a car, so... no car.
In the carbon offset market, the value one gets from buying an offset is however much you save by emitting that ton of carbon instead of avoiding the emission. If it would cost you a few thousand dollars to retrofit your home to passive heating to reduce your emissions by, say, 10 tons per year, you can amortize those few thousand dollars over time and decide whether it's a better choice to do the retrofit or to buy the offsets. That's "extracting value" from the offset.
By allowing trading companies to profit from these carbon offsets; the value will most certainly be far more than their actual worth.
Like I said, I doubt there will really be much profit in secondary trade of carbon offsets. But, like anything, the question is whether they're providing value, not whether they're making money.
In the stock market, the various exchanges operate a kind of oligopoly. You can't buy IBM stock except on the DOW. You can't buy Google stock except on Nasdaq. Because most of the stocks people really want to trade are traded on the big exchanges, the exchanges can set artificially high prices on executing those trades. It's questionable (to me) whether they're really providing value for the money, but people certainly seem willing to pay the fees.
The offset market isn't much like the stock market, though. It's more like the t-bill market, which doesn't have those arbitrary and exorbitant fees. It's also not where you put your money when you're looking for a big ROI. So that kind of profit taking isn't likely to be present in the offset market.
I just don't want that cost to be artificially inflated beyond the real value. That is where my fear lies.
The problem doesn't lie in the basic concept. It's probably true that at least some of that fear is justified - but that's because our political system has big problems. None of this can take place without Congress setting it up, and they're likely to, as you've suggested earlier, cut all kinds of stupid deals that break down the efficiency of the system.
But that's no different than loopholes in the tax law. The question of whether income tax is a reasonable thing for the government to impose is mostly independent of the existence of loopholes.
RE: Apples and oranges by ldsudduth :: NR7 :: on 10 April 2007
I'm not contesting that. Just questioning its relevance.
The relevance of my corn comment is in the big picture. Just as corn has value that is being overinflated, so will the carbon offsets if we allow it. Not only that, but just as corn-based ethanol is not a panacea, neither are the carbon offsets.
The sale price of something has almost nothing to do with the cost to manufacture it.
I agree--to a point. Let's use your 'fried dough' analogy shall we? Raw ingredient cost plus transport to site cost plus equipment (trailer with deep fryer, oil, fuel, miscellaneous other costs such as packaging, condiment, etc) plus time to manufacture plus profit margin does equal your price of $2.50. The consumer decides if it is worth it or not.
The problem doesn't lie in the basic concept...In the stock market, the various exchanges operate a kind of oligopoly. Like I said, I doubt there will really be much profit in secondary trade of carbon offsets. But, like anything, the question is whether they're providing value, not whether they're making money.
I'm combining some of your comments because we essentially agree here. I do, however disagree with you on the secondary trade value. If Goldman/Sachs and their ilk has their way, this will be another commodity much like grain, oil, or cocoa.
It's probably true that at least some of that fear is justified - but that's because our political system has big problems. None of this can take place without Congress setting it up, and they're likely to, as you've suggested earlier, cut all kinds of stupid deals that break down the efficiency of the system.
This is exactly why for this system to work, it needs to outside the purveyance of the government. These are not commodities, and not one penny of profit should be made. If it costs $1000 to offset one metric ton of carbon, then that is what the value of the offset it represents; not one penny more. Congress or another agency may need to set it up, but it has to be tightly regulated so that the ability to make profit off of this is negated. It should be a win-win, but not a win-profit.
RE: Apples and oranges by scottb :: NR7 :: on 10 April 2007
This is exactly why for this system to work, it needs to outside the purveyance of the government.
I disagree. This is exactly why it must be under the government. Nobody else has the authority necessary to make it work. Emitting carbon without an offset has to be more costly than buying an offset, by a considerable margin, or there's no motivation for any corporation to participate. A non-governmental entity can't impose those fines.
I think you're really just misunderstanding how the carbon offset market has inherent differences in it from most of the other things you've compared it to. Stocks, commodities trading, derivatives, and so on are fundamentally different from t-bills. The markets really don't work the same, and the kind of "evil" profit taking you're afraid of just isn't possible with the way the t-bill market works. The carbon offset market, by its very nature is quite similar to the t-bill market.
The problem would be more where some Senator slips in a rider on a bill that allows GM cars to be assessed with a different emissions model than foreign cars, resulting in GM's cars having fewer offsets than their actual emissions warrant. The kind of problems I forsee mostly affect the efficiency of the market, not profitability.
By the way, in the carbon markets that exist today, it's nowhere near $1000 to offset a ton of carbon. They typically run around $10/ton. Now, these are probably cheaper than an American market would be - things cost more here because of our higher standard of living, and many of the offsetting activities that these buy are in other countries, but it seems unlikely that it'll be more than an order of magnitude ($100/ton) higher. Probably less. It wouldn't surprise me at all if the price would stabilize around $30-$50/ton.
The relatively low cost of the offsets, combined with how few people seem to have the slightest clue as to what they cost, is something that really bugs me about these things being characterized as "indulgences" - as if only the wealthy can afford them. A typical American home emits something like 20 tons of CO2 per year, so the total cost of a family's offsets are just a few hundred dollars now, and will probably never be more than a $1000 (before inflation).
RE: Apples and oranges by ldsudduth :: NR7 :: on 11 April 2007
Nobody else has the authority necessary to make it work.
Nobody else has the authority to set it up so that trading companies and corporations profit, either. Even the companies who sell T-Bills make a profit on the sale--and that profit is built into the selling price; they wouldn't sell them otherwise. I'm not 'misunderstanding' how the market works, I'm showing the fear that without proper regulation it could be subverted into another 'vapor' device like stocks. In no way should this market be set up to make any profit.
Your comment about the rider slams home exactly WHY this has be regulated. I can see the whole thing being set up like PA just did School Taxes--allowing certain districts to sidestep a new law designed to lower property taxes through gaming revenue (Act 1) and allow them to be raised at the discretion of the local school board--or in this case the 'Carbon Offset Board'.
I was tossing out a number for the cost, I'm glad it's NOT $1000/ton, but your point about how much a home emits, this amounts to yet another tax on homeowners who are already overburdened with taxes on their homes. Taking my area into consideration here is the breakdown millage per $100,000 value of home:
This makes the annual tax on an $200,000 home in my area to be somwhere in the neighborhood of $4,000 a year. Not only that, but the school district I live in has the authority to raise the taxes annually without a voter referendum to offset certain costs. The other school district in town has a higher school tax, resulting in an average yearly cost of around $5,000 per year on the same home, and they also have the right to raise this without voter referendum. Carbon offsets will add another $600-$1,000 per year to this based on your estimates. It's yet another tax on individuals. Add to that our cars, motorcycles, boats (boating is really popular here, lots of pontoons on the local lake), backyard grills..the list could be large. My area does not lend itself well to public transportation either, so cars are a necessity rather than a luxury as in where you reside.
My point is that there MUST be regulation, and that regulation must be outside of the reach of Congress. Otherwise, this system will be set up to make more profit. This, above all else, should be a Zero profit system.
RE: Apples and oranges by scottb :: NR7 :: on 11 April 2007
I hear what you're saying, but I still think you're missing why most of those aren't issues. You don't need a "carbon offset board" to set prices. The carbon offsets are auctioned. The buyers set the price.
You're expressing fear about this turning into something like a stock market, but haven't even begun to suggest how it could get there, while I've been trying to describe how that's unlikely.
The trading price of the offsets isn't in anyone's control - that's the point of an auction. The government entity that manages the process does nothing more than act as auctioneer, in that respect. It's other job would presumably be to investigate and prosecute "emitting without an offset" offenses.
The fear shouldn't really be about someone profiting in the market. It should be over that secondary function. If the "carbon police" can't or won't do an effective job, then people can ignore the system.
It's yet another tax on individuals.
Yes, it's entirely analogous to a tax on individuals. Where it differs is that for an ordinary tax, the legislature chooses the amount of the tax directly. Here, the amount of the tax gets directly tied (by the auction) to the cost of the emissions.
But it should be paid by the individuals. Power companies don't emit greenhouse gas because they're evil madmen bent on world destruction. They emit because it's the cheapest way to deliver electricity to homes and business. And the businesses don't use electricity because they want to bump up carbon emissions, they do it because they need it to deliver their products and services - which ultimately filter down the supply chains to the consumers.
The consumers are the ones who drive the emissions and the whole point of the system is that it provides a lever by which to control their behavior. But, since this is a democracy, it's those same consumers who run the government that fiddles with the lever.
My point is that there MUST be regulation, and that regulation must be outside of the reach of Congress. Otherwise, this system will be set up to make more profit.
All this really says is we should sign some international treaty like the Kyoto accords, then. The accords apparently establish quite rigorous guidelines for this stuff.
RE: Apples and oranges by ldsudduth :: NR7 :: on 11 April 2007
Yes, it's entirely analogous to a tax on individuals. Where it differs is that for an ordinary tax, the legislature chooses the amount of the tax directly.
Taxes are a very sore-spot for most homeowners here--and did you actually read what I said? Legislators aren't setting the School Tax in either school district where I live (in fact, 40% of the districts in PA are exempt from having to let the people decide) but the School Board will decide the rate; without need for taxpayer or legislature approval.
You missed what I posted about here Goldman Sachs, Morgan Stanley and their ilk wanting to profit from the trade of these carbon offsets. They're not in it for their health, they intend to make millions. Who's going to pay? We are--all of us, from the wealthy down to the dirt poor.
I applaud the effort, but it really needs a lot of attention. Your auction comment bothers me as well, since it's at 'auctions' where we see high prices paid for things with no *actual* value--where the 'value' is strictly in the eye of the beholder, rather than where one can assign some value from production costs.
This needs a LOT of study and LOT of stopgaps to prevent from being too expensive for John Q. Public.
RE: Apples and oranges by scottb :: NR7 :: on 11 April 2007
Legislators aren't setting the School Tax in either school district where I live but the School Board will decide the rate; without need for taxpayer or legislature approval.
I don't really see the relevant difference. The legislature assigned the executive branch authority to set the rates.
You missed what I posted about here Goldman Sachs, Morgan Stanley and their ilk wanting to profit from the trade of these carbon offsets.
I didn't miss it. You didn't offer any references, so I judged it on its merit. I don't see how those companies can make a profit, and I strongly suspect you're really just repeating some FUD you got from someone who doesn't really understand what's going on.
Your auction comment bothers me as well, since it's at 'auctions' where we see high prices paid for things with no *actual* value--where the 'value' is strictly in the eye of the beholder, rather than where one can assign some value from production costs.
So apparently you missed my comment that all prices are "strictly in the eye of the beholder". Attempting to "assign some value from production costs" is a really fundamental misunderstanding of economics. It's also the basic goal of communism.
Value does not come from production costs. It comes from what people are willing to pay.
This needs a LOT of study and LOT of stopgaps to prevent from being too expensive for John Q. Public.
Meanwhile, nothing gets done and we continue destroying the world.
We need to act. It would be better to set a flawed system up and correct it later than to keep with "business as usual".
RE: Apples and oranges by ldsudduth :: NR7 :: on 11 April 2007
I didn't miss it. You didn't offer any references, so I judged it on its merit.
Actually, in the original posting I made, I did cite the Fox News Article that details the fact that several Wall Street Firms want the ability to buy and sell the carbon offsets. Here is the relevent quote once again:
all prices are "strictly in the eye of the beholder". Attempting to "assign some value from production costs" is a really fundamental misunderstanding of economics.
Scott, your fundmental understanding of 'real world pricing' indicates to me that you seem to have little real world experience in the realm of manufacturing, or retail. Nearly all my life I have worked either in the field or around it. I grew up in farm/auto manufacturing country and I'm quite well versed in how pricing is set. I cut my teeth (after the military and college) in the retail(food) and manufacturing (electronics) realm. I also have worked for a time in regulated and unregulated utilities, where there are government price controls in regulated, but not in the unregulated. My g/f is a Materials Manager/buyer/bid planner for an electronic manufacturing firm. Between the two of us is nearly 50 years of experience. I truly do understand the underlying methodology of setting pricing; I've actually done that in my early pre-network engineer days.
At the simplest level, it is raw material cost +manufacturing/assembly cost (ie. 'labor) +overhead +profit margin decided by the company that decides base pricing. There are variances in pricing at the retail level yes--depending upon numerous factors; but the raw cost of an item is not *essentially* in the eye of the beholder.
Value does not come from production costs. It comes from what people are willing to pay.
At a philosophical level, you are essentially correct, the value of an item can be in the eye of the 'beholder', but only to a point. For example, a Hanes T-shirt 3pack at the local big box store is much cheaper than the same 3pack at your local business because of volume buying. Both stores probably make an identical (or nearly identical) profit margin. It's up to the beholder as to whom they will deal with: local business or big box store. A lot of local businesses remain, so enough people must feel the need to purchase there rather than the 'big box store'. So, yes at some level the 'value' of an item is arbitrary, but the raw cost is not. Yes we decide what we will pay, but that is only after an item has been priced from the raw material stage upward. Product X must bring a profit (ignoring loss leaders and their ilk--overall the business must make a profit), and that is the value (price) assigned by the business above the 'material cost'.
We need to act. It would be better to set a flawed system up and correct it later than to keep with "business as usual".
Correct it later? Correct it when? After John Q. Public has been summarily raped? This whole 'carbon offset auction' system proposed troubles me because of the limited availabilty of the offsets. For sake of argument, lets say there are 1500 companies in the world. Now, let's say that there are 500 'offsets' available from those companies. If I understand the process correctly, that could mean there are 1000 companies (or more) bidding for those 500 offsets. How is this not going to lead to overpricing and overvaluation? The entire purpose of an 'auction' is to acheive the highest price for a commodity--which often exceeds the actual retail value of said commodity.
What about John Q. Public? am I going to have to buy offsets for my car, my apartment, using the bbq grill at the state park? building a fire to cook over on a camping trip? If so, then it's a tax, and it's completely wrong.
I'd rather see EPA regulations for corporations with stiff fines and penalties for failure to comply; even on homeowners. I'd rather see tax breaks for businesses and consumers in order to alleviate the burden of paying for upgrading systems to emit fewer greenhouse gasses. I'd rather see low-interest loans for John Q. Publics who exist from paycheck to paycheck so they can afford to make the necessary upgrades to their homes. Or, free upgrades to those who truly cannot afford it.
I'd rather see the EPA use its' abilitiy to create and enforce the needed rules. The recent ruling is a step in the right direction.
RE: Apples and oranges by scottb :: NR7 :: on 12 April 2007
Actually, in the original posting I made, I did cite the Fox News Article that details the fact that several Wall Street Firms want the ability to buy and sell the carbon offsets.
Sorry - saw the quote, missed the link. But that clears it up - you were referencing FUD. :)
I truly do understand the underlying methodology of setting pricing
Clearly you don't. You repeatedly confuse price with cost. They're entirely different concepts. The only bearing that cost has on price is to represent a minimum. If you can't cover the cost, you're better off not selling the item.
but the raw cost of an item is not *essentially* in the eye of the beholder.
True, and I've agreed with that repeatedly. But cost is not value. The value of something is what a buyer is willing to pay for it, not what the seller had to pay to make it.
The example you give of the local big box stores actually demonstrates my point. The reason the big-box store has lower prices is because they have a cheaper supply chain, which results in lower costs. If the only two stores in town that sold t-shirts were right next to each other, one the big box store and the other a mom-and-pop, with signs in the window saying "3-pack of t-shirts, $5.99" and "3-pack of t-shirts, $7.99" in the window, respectively, the mom-and-pop shop is likely not to sell a single package unless the other store sells out completely. The buyers will decide that those t-shirts aren't worth $8.
A painting may cost the artist nearly nothing to make (though I'm shocked at the prices they charge for my wife's art paints, so maybe not so nearly nothing). But it's wrong to say that the painting is worth "nearly nothing". If nobody wants to buy the painting, then it's worth literally nothing. If one person wants to buy it, and they're willing to offer $200 for it, the artist needs to decide if it's worth less than $200 to him - if it is, he sells it. If two people want to buy it, we've got a marketplace. The painting is worth exactly what the highest bidder in the marketplace is willing to pay, subject to the minimum the artist will accept.
That's how all prices are set. Stocks do basically the same thing - people who hold the stock set a price at which they're willing to sell, people who want the stock set a price at which they're willing to buy. If the lowest "sell" price is higher than the highest "buy" price, there's no deal. We wait until someone revises their prices. When they finally overlap, a trade happens and the whole thing starts over. Since there's normally overlap, and there are normally a large number of people in both groups that there are constant price changes, the net result is the market tracks the value of the stock.
Correct it later? Correct it when? After John Q. Public has been summarily raped?
It's not like we do one auction and we're done. There's an auction every year (maybe even more often, though that introduces some other complications). If we don't like something about the outcome of the first one, we can change it for the next one.
This whole 'carbon offset auction' system proposed troubles me because of the limited availabilty of the offsets. For sake of argument, lets say there are 1500 companies in the world. Now, let's say that there are 500 'offsets' available from those companies. If I understand the process correctly, that could mean there are 1000 companies (or more) bidding for those 500 offsets.
Hello? Is this thing on? That's not how it works. I've already described this.
The government (that is, "we the people") decide what our "acceptable" level of emissions will be for the year, and that becomes the initial pool of offsets. Companies that actively remove CO2 from the environment are also allocated (at no cost) a corresponding amount of offsets, which they can choose to add to the initial pool, or just keep. If they choose to add them too the pool, they get the proceeds from the sale (presumably after the government takes a cut as a transaction fee).
The government announces how many offsets are available and holds an auction, in which anyone can participate. Everyone who emits carbon needs to ultimately acquire an equal amount of offsets.
In choosing the size of the pool, we pick an amount that represents a viable target - we know we currently emit 5 billion tons of CO2, so it's unrealistic to only make 2 billion tons of offsets available, since nobody can effect the necessary reductions fast enough. So maybe the first year we shoot for zero growth and set the pool at 5 billion. Then the next year we aim for a 5% reduction and make 4.75 billion available. Each year we revise our goals based on available technology and so on. Clearly, this is a place where politicians could screw it up, but not in the sense you're afraid of. Special interests are likely to push them to set the cap too high, but there's no "raping of the public" involved.
Obviously, we can't have an auction with 300 million bidders, so most people will want to get their offsets through some sort of proxy. There are a number of ways we could do that - the state or local governments could buy an appropriate level of offsets and have a local auction or something. For some items, we could attach it to some existing transaction - maybe you buy car offsets when you renew the registration, or as part of emissions testing. Probably the best way is to attach it to sales. When you sell something that emits CO2, you have to include the appropriate offsets with it. That forces the offset purchases upstream and effectively rolls them into the price of the item.
The entire purpose of an 'auction' is to acheive the highest price for a commodity--which often exceeds the actual retail value of said commodity.
Nope. That's just plain wrong. The purpose of an auction is to determine the right price for a commodity when the price is uncertain. The uncertainty can be because the price is highly variable - such as in the Wall Street commodities markets for pork bellies or orange juice - or it can be because the item is unique in some way and doesn't have an established value.
It's almost impossible for an auction to result in a sale that's over the retail price of the commodity. You occasionally see it in environments like eBay where the bidders are often ignorant of what the real going rate is, but if we're pushing this upstream like I suggested, the bidders will be thoroughly well informed.
What about John Q. Public? am I going to have to buy offsets for my car, my apartment, using the bbq grill at the state park? building a fire to cook over on a camping trip?
As I said, it's probably impractical to require individuals to participate directly, so it makes more sense for you to get the offsets for your car, apartment, grill and so on when you buy them in the first place - the car manufacturer would buy them and include them in the sale; when the landlord pays their property taxes, they also have to buy the appropriate amount of offsets; the grill manufacturer buys offsets that are included in the sale of the grill.
If so, then it's a tax, and it's completely wrong.
As I agreed before, it's quite similar to a tax in many ways, but why is it wrong? It's exactly those activities that are causing the carbon emissions. And it's exactly that behavior we're trying to modify here.
I'd rather see EPA regulations for corporations with stiff fines and penalties for failure to comply; even on homeowners.
How is this different? The regulations will either force the company to reduce emissions - the cost of which will be paid by their customers - or to pay the fines - the cost of which will still be paid by their customers.
I'd rather see tax breaks for businesses and consumers in order to alleviate the burden of paying for upgrading systems to emit fewer greenhouse gasses.
Tax breaks are fine to incentivize optional behavior. We need to make it mandatory, so tax breaks aren't a useful strategy.
I'd rather see low-interest loans for John Q. Publics who exist from paycheck to paycheck so they can afford to make the necessary upgrades to their homes. Or, free upgrades to those who truly cannot afford it.
So why not include the low-interest loans or free upgrades in addition to the offset program?
I'd rather see the EPA use its' abilitiy to create and enforce the needed rules. The recent ruling is a step in the right direction.
See, and I think the EPA has demonstrated its inability to do anything of the sort. I think that if we really want our efforts to address global warming to be a complete failure, then the EPA are just the guys for the job.
The kinds of strategies you're talking about are exactly the strategies that have resulted in the really abysmal status of our school systems. The politicians know exactly how to play those systems for political gain.
It's only the really serious conspiracy cranks that think the t-bill market is corrupt, and the carbon offset market is virtually identical.
Believe me - I hear your concerns. I hate the way the government screws these things up, too. But the carbon market is much more likely to work than an EPA-mandated emissions reduction program.
That recent ruling you referenced isn't the EPA taking a step in the right direction. It's the Supreme Court scolding the EPA because they've been dragging their feet on the issue. More than dragging their feet - they've essentially failed completely at their responsibilities in this area. They've been saying for years that they have "no authority" to regulate greenhouse gas emissions from cars and the court said that not only did they have the authority, they had a "statutory obligation" to do so.
The EPA apparently needs to be dragged kicking and screaming to do something about it.
RE: Apples and oranges by ldsudduth :: NR7 :: on 12 April 2007
I will concede the cost vs price discussion. My idea of the 'value' of an item is the price one pays for it when purchased; and that's what I'm referring to. That price is still set by the factors I quoted, for the most part. (and I agree with you about the cost of art supplies!) Something like art, that an individual creates does have a subjective value; though I suspect much of that relates to how much the artist views his time to be worth.
The Fox News piece represents a possibility; and with the economic might of those companies, they just may be able to get their way. If so, then the price for those offsets will have artifically inflated 'values'.
My understanding of how the Carbon Offsets work came from reading several websites; they indicated that the number of offsets comes from those companies who already emit below the emission number for the year. I may have misunderstood their intent, but it seemed that there could be more companies bidding for offsets than there would be offsets available. In an auction, with multiple bidders bidding for a few items; the price frequently is bid far higher than the actual value.
The EPA apparently needs to be dragged kicking and screaming to do something about it.
That's exactly what I meant about the court ruling; the EPA used to have teeth, but for whatever reason, they seem to have forgotten they were a shark and have turned into a neon tetra.
I still think regulations and tax incentives are the right way to go; this way we can be assured of less price gouging. Auctions--especially those where financial services companies are the ones running the show--will cause the prices to be at a value where the working poor will be unable to afford them. I would hope that (as you suggested) if we do go down this road, that loans/upgrades will be offered for free to the working poor. For example, the poor person living in Appalachia, who has an old car that is, say, 20 years old or more. What do we do about them? They can't afford to buy a new car.
Companies should only be able to pass a portion of the cost of making these upgrades on to their customers. Another portion should be covered by tax incentives, but I would say that a large portion--at least 30%, should be a direct impact to profit. The same goes with any fines paid--except if they are fined, they do not get a tax br