Repair your carbon credit, cheap

February 27, 2007 8:11 PM

December 2006: carbon credit market to crash-land? One problem, most of the countries submitted emissions plans that allocated permits for more than is currently being emitted--in other words, instead of reductions, they proposed increases. Collectively, EU countries have allocated permits allowing emissions 15 percent higher than actual emissions. February 2007: Splat. The collapse in the price of a tonne of carbon dating back to May last year when it emerged that most countries in the scheme had set their carbon caps far too high, resulting in fewer firms than expected having to buy credits and causing the price of a tonne of carbon to plummet from over €30 to less than €10. SPLAT!: A year ago, CO2 was changing hands in the ETS at 30 euros (33 dollars) a tonne, triple that at the market's launch in January 2005. Today, a tonne of CO2 can be bought for little more than one euro. I'm a good greenie, I'm buying enough credits to offset my coal-fired barbie and my Bradley Shopping Vehicle for the rest of eternity. That should cost me about fiddy cents. (Buy yours here.)
posted by jfuller (18 comments total)

Yeah this is a problem with the current scheme. Until real emissions limitations are enforced carbon credits are basically worthless. I didn't realize it was this bad though.

Still, I wish people would stop using the term "carbon" to refer to CO₂ and hydrocarbons seemingly interchangeably.
posted by delmoi at 8:21 PM on February 27, 2007

This is one of the problems that William Nordhaus cites when describing how carbon taxes are preferable to cap-and-trade: how do you set the baseline for each country?
posted by russilwvong at 8:22 PM on February 27, 2007

Buy offsets instead. Or even just buy stock in clean tech.
posted by stbalbach at 9:03 PM on February 27, 2007

Phase II starts in 2008, right? I think they're calling for some serious belt-tightening then. We'll see if it happens.

By the way, jfuller, you're confused between carbon offsets and emissions trading. I expect that similar confusion will take up most of the rest of this thread. Semi-informed denizens of Metafilter: Have at it!
posted by mr_roboto at 10:08 PM on February 27, 2007

mr_roboto... instead of sneering, since you expect us to be ignorant, why not give us a brief synopsis?
posted by Malor at 10:34 PM on February 27, 2007

OK; you're right, I was being assholey. It's just that there was a thread last week on related issues and there was no end to the confusion and I got frustrated.

Emissions trading and carbon offsets are similar in that they're both basically market based. The structures of the markets and the nature of the participants differ radically, however.

Emissions trading is a regulatory scheme set up to cut CO2 emissions from industry by taking advantage of market efficiencies. Basically, the regulatory agency sets a cap on the total allowed amount of CO2 emissions in a region and issues (or, optimally, auctions) permits to emit CO2 such that the total permitted emissions are under this cap. Industrial CO2 emitters can then trade these permits on an open market. The idea is that by allowing the market to allocate permits, companies that can cut emissions efficiently will do so, and companies that do not cut emissions will have to pay for them.

Carbon offsets are not part of a governmental regulatory scheme (in fact, there have been complaints that lack of regulation makes them untrustworthy). Offsets are privately marketed....contracts, I suppose you could call them....that allow a buyer to purchase a certain amount of emissions reduction from a seller. There are also offsets that rather than reducing emissions allow a buyer to purchase a certain amount of carbon sequestration, say by funding the planting of trees. There are also offsets that pay for investments in "green" energy. The whole thing strikes me as rather fast-and-loose, frankly. Anyway, no caps with these, and anyone who wants to buy them can feel free.

I say jfuller seems confused not only because he used the word "offset" to refer to the EU emissions trading scheme, but because he says he's going to buy EU emissions credits and he linked to a site where he claimed "you" can buy them. Well, you can't, unless you're "Any named operator in any of the National Allocation Plans for the EU Emission Trading Scheme" or a banker or broker dealing in the EU emissions trading market. That link isn't for offsets for your "barbie"; it's for EU emitters and market speculators.
posted by mr_roboto at 11:13 PM on February 27, 2007

Oh, and I totally agree with Nordhous that a carbon tax is probably an easier route to cutting emissions. But it'll probably never fly in the US, and the idea of a trading scheme is just so elegant. Bootstrap off of market efficiencies, optimally allocate pollution and, eventually, encourage remediation technologies... The guys at Reason are pretty enamored with the idea, actually (just read some of the links off of that first article), as you would expect any good capitalist to be. It's just that the EU seems to be fouling it up.

The SO2 trading scheme in the US has worked quite well, on the other hand. But we set serious goals....
posted by mr_roboto at 11:19 PM on February 27, 2007

Rather than whacking off and pretending that your $10 actually reduces carbon, go plant a few trees. I'm set for life, as I have personally planted over 2000 trees.
posted by Sukiari at 11:49 PM on February 27, 2007

I'm a good greenie, I'm buying enough credits to offset my coal-fired barbie and my Bradley Shopping Vehicle for the rest of eternity. That should cost me about fiddy cents.

That's an awesome dig. I am not even sure if I have it all worked out but it seems to be smearing 'greenies' with the unconcern and poor language skills of hiphop rappers while at the same time the rappers get smeared with the touchy feely of 'greenies'. Plus you have slipped in a dig at australians, perhaps because of Howard's flipflopping on the Iraq issue - pro america surge and pro british withdrawl.

Having read the DaVinci code I feel I can decode this. Assigning an arbitrary letter value to each insulted group it gives the following letters O-G-R-E which is an anagram for GORE.
posted by srboisvert at 2:25 AM on February 28, 2007 [1 favorite]

I wish people would stop using the term "carbon" to refer to CO2 and hydrocarbons seemingly interchangeably.

Why? That's a curious sentiment. After all, the carbon atom is at the heart of hydrocarbon chemistry in a way that hydrogen and oxygen aren't. The phrase "carbon-based life form" is popular for good reason. And there's a pretty direct link between hydrocarbon fuels and CO2.
posted by sfenders at 4:09 AM on February 28, 2007

stbalbach: Buy offsets instead. Or even just buy stock in clean tech.

Buy less!
posted by Chuckles at 6:08 AM on February 28, 2007

The SO2 trading scheme in the US has worked quite well, on the other hand. But we set serious goals....

posted by mr_roboto at 11:19 PM PST on February 27

I'm finding precious little on the internets to back up that statement; I'm not doubting you but their just seems to be a cloud over the topic and that cloud has a name: ENRON. It's not that everyone doesn't call it a success, it's just hard to pin down just what the success was. And why were those Northeastern states suing the EPA again?

The idea may be elegant on paper, but in practice it was bundled with general energy reregulation that promised "market efficiencies" which would reduce prices by removing state mechanicsm meant to control prices see: California energy crisis. Like so many Clinton era programs (which really start during Bush I) the idea is really kind of slight: you save pennies on the dollar for industry (through "market efficiencies" ) at the cost of massive give-aways and built on a politics that is easily wiped away the next time you elect a "Texas" oil-man as president.

Personally, I think absent the (political) con that I think pollution credit trading is, why would large heavily regulated energy utilities want to trust their bottom lines to the market? I think if they were serious about reducing emissions they would prefer phased reduction with mandated price increases. But please, convince me I'm wrong. Seriously...
posted by geos at 6:23 AM on February 28, 2007

I was too late to matter in the last thread, but this seems on topic enough. Does anyone have any information by what exact mechanism Gore is offsetting his carbon? Is this something that the is doing personally or is there some entity that he tells, "I'm going to be doing a lot of post Oscar junkets I need to order offsets for XYZ more tons CO2."?

Mostly how much is the cost?
posted by betaray at 8:09 AM on February 28, 2007

I have a sinking feeling that all this money would be better spent working out how to live in a carbon-rich atmosphere than trying to delay the inevitable.
posted by hoverboards don't work on water at 8:56 AM on February 28, 2007

mr_roboto: Phase II of the EU scheme does indeed start in 2008. Current permits cannot be carried over and the EU has recognised the problem from last year and stated there will be a big reduction in the overall cap (it rejected the proposed caps from 11 memeber states - all except the UK). This has meant that 2009 carbon price is already at EUR 15.50 -- and this rises for future years as airlines are brought into the scheme.

Essentially the Phase I market is all done and everyone is looking to Phase II. There are plenty of people trying to get into the market so it's not quite the doom and gloom that the FPP proclaims.
posted by patricio at 9:16 AM on February 28, 2007

The blink tag is right!

Capitalism's already dancing as fast as it can. Eventually we'll have to realize that if your economy isn't locally sustainable, it isn't sustainable.
posted by poweredbybeard at 12:25 PM on February 28, 2007

geos writes "It's not that everyone doesn't call it a success, it's just hard to pin down just what the success was."

Here you go. A ~60% decrease in sulfur dioxide levels nationwide since 1980; total levels cut in half since 1990.

geos writes "And why were those Northeastern states suing the EPA again?"

This suit, you mean? They want the EPA to regulate levels of greenhouse gases, particularly CO2. That suit has nothing to do with the SO2 emissions market. Is there another one I don't know about?

poweredbybeard writes "Capitalism's already dancing as fast as it can. Eventually we'll have to realize that if your economy isn't locally sustainable, it isn't sustainable."

Well, that goes against about 150 years of economic theory.
posted by mr_roboto at 12:49 PM on February 28, 2007

Well, that goes against about 150 years of economic theory.

That's actually not as stunning a rebuttal as you may think.
posted by wilful at 2:52 PM on February 28, 2007