What Is the CO2 Market and Is It Rigged?

December 17th, 2011
in econ_news

EconintersectBloomberg reported today (Friday, December 16) that “privileged” information may be used by some of the participants in the EU (European Union) CO2-yield-signcarbon permits market.  The market for these permits is run by the European Investment Bank in Brussels and is quite opaque.  The transparency is so poor that it is not even known if trading has actually taken place.  According to Bloomberg, the EIB may have sold some 2013 permits last week worth as much as €1.5 billion ($2 billion).  But, if it happened, no one is talking.  The proceeds from permit sales will be used in funding renewable energy and carbon capture projects in Europe.

Follow up:

From Bloomberg:

Companies buying 2013 European Union carbon permits directly from the European Investment Bank may have “privileged” information that other traders don’t have, according to an emissions trading lobby group.

“It’s not very easy to assess the impact” of the sales, because they are confidential, said Simone Ruiz, Brussels-based European policy director at the International Emissions Trading Association. “There are many rumors and that’s not helpful.”

The lack of public information about the commencement of the sales means that “if you are a recipient of a large volume you are in a privileged position,” Ruiz said today by phone. “The market wants more transparency.”

Bloomberg says that the spokesman for the EIB whom they contacted declined to comment. The EIB could use a present day Calvin Coolidge. The former American president once famously said, “No comment…. and don’t quote me.”

If the trading processes are not transparent it is perhaps because the traded entities and their releationships are distressingly complex, as shown in the following flow diagram from Green Rhino Energy:


The definitions for the various instruments traded and transferred is also given by Green Rhino Energy:


carbon markets table 1

Of course there are complicating rules:

carbon markets table 2

The final factor that must be introduced in this discussion is the position of global warming deniers and skeptics, such as The Political Commentator, which today posted eight critical questions for climate change proponents:

1.  Why can't warming alarmists produce a single legitimate example of empirical evidence to support the manmade global-warming hypothesis?

2.  Why has Earth been warming for 300 years when man has only emitted measurable amounts of CO2 into the atmosphere for the last 150 years?

3.  Why did Earth cool for 500 years before the recent 300-year warming and warm for several hundred years before that when even the Intergovernmental Panel on Climate Change says CO2 levels did not change?

4.  Why was the Medieval Warm Period, a thousand years ago, warmer than today even though the CO2 level was 38 percent lower than today?

5.  Why did many of Earth's major glaciers in the Alps. Asia, New Zealand and Patagonia begin to retreat nearly half a century before the Industrial Revolution and man's CO2 emissions?

6  .Of the last five interglacials, going back 400,000 years, why is our current interglacial the coolest of the five even though Earth's CO2 level is about 35 percent higher?

7.  Why has our current 10,000-year-long Holocene epoch been warmer than today for 50 percent of the time when CO2 levels were about 35 percent lower than today?

8.  Why are correlations of Earth's temperature with natural factors such as sunspot numbers, solar cycle lengths, solar magnetic variations and changes in major ocean currents all better than the correlation of Earth's temperature with CO2 levels? (WND)

Analysis and commentary at GEI (links below - Sources) have discussed how to deal with the uncertainty, most recently by Andrew Butter who analyzed climate change from a tail risk perspective, and before that in a commentary by Derryl Hermanutz with a more skeptical viewpoint.  Elliott Morss has analyzed the sources of CO2, future estimates of global energy needs and the possible projections for future carbon loads introduced to the atmosphere.  A link to the most recent article (which contains links to previous work) is given in the Sources list.

Sources: Bloomberg, Green Rhino Energy, The Political Commentator, and Global Economic Intersection (Andrew Butter, Derryl Hermanutz, Elliott Morss)

Hat tip to Russell Huntley

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1 comment

  1. pito says :

    Marxism Today if I remember in the mid 1980's had an article and the author thought that people would give up their rights to save the environment.
    The great con job was then created.
    I think this answers all 8 questions.
    It has been many years but I believe not too long after that Michael Gorbechov left the Soviet Presidency and moved to California and became head of a Green movement.

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