Emmissions Trading - The Next Subprime?
Often alluded to as a new fiat currency, and quite possibly the next sub prime bubble, carbon credits are expected to eclipse both gold and oil, possibly becoming a 10 trillion dollar market at maturity according to Richard Sandor, founder of the Chicago Climate Exchange ("CCX") and often called the "father of carbon trading". But Sandor is also a pioneer in the area of derivative financial instruments, credited with having "brought derivatives to the agricultural, insurance, and utilities sectors." Speaking of derivatives, another popular proponent of the "market approach" to combating pollution and global warming is Blythe Masters, who is "widely credited with creating the modern credit default swap." (1)
"Masters says banks must be allowed to lead the way if a mandatory carbon-trading system is going to help save the planet at the lowest possible cost. And derivatives related to carbon must be part of the mix, she says. Derivatives are securities whose value is derived from the value of an underlying commodity -- in this case, CO2 and other greenhouse gases." (2)
By the way, CCX owes its existence in large part to two very generous grants from the Joyce Foundation; a $347,000 in 2000 and another $760,000 in 2001. (3) Coincidentally, Barack Obama sat on the Joyce Foundation Board at that time. (4) It should also be pointed out that Al Gores Generation Investment Management also owns stakes in CCX, as does Goldman Sachs. (5) And in a remarkable twist of fate, Gore has teamed up with quite a host of personnel from Goldman Sachs in the founding of GIM, including David Blood, former CEO of Goldman Sachs Asset Management, Mark Ferguson, former co-head of GSAM pan-European research; and Peter Harris, who headed GSAM international operations. In fact, Gore's primary founding partner in GIM was Hank Paulson, former Goldman Sachs Chief Executive. (6) A green version of The Carlyle Group, maybe? Cozy. Remember, too, that Gore somehow finds time to be a partner in Kleiner Perkins Caulfield & Byers, a very prestigious venture capital firm, whose "Pandemic Biodefense Fund" should do fairly well if all the influenza vaccination hype continues. (7) So too should an old friend, Donald Rumsfeld, since he also has very large stakes in Tamiflu. Oh, speaking of Goldman Sachs, they are currently morphing into an oil company, buying up oil fields, tankers, pipelines ... and more importantly they own (along with other oil companies) the primary trading floor on which oil futures are now trades, the intercontinental exchange (or "ICE" - based in Atlanta) which is unregulated by the US government. This should come as no surprise since oil profits are "unparalleled" even by pharmaceuticals, defense, and banks ... (9)
Wow. What tangled webs they weave. But getting back to the trading of carbon credits: It looks like the cards are in place for a repeat of something we've all seen before; looting via fiat. As it happens Kyoto is up for renewal in 2012. It will be interesting to see what happens at the Durban meetings which begin next month. The topic of "emissions trading" is on the agenda, and will probably be very well represented by the big business elite. After all, hydroelectric dams which lay waste to entire river valley ecosystems in the third world are referred to as "clean development mechanisms" under Kyoto, an accord authored by big business, providing a way for people to think they care about the environment without actually making any sacrifices. My guess is that trading carbon credits (or pollution quid pro quo) is a foregone conclusion given the current financial milieu of hucksterism. In the end, it's ok to pollute, especially if it can be commodified and hence gamed by the top dogs. And even better if they can get those pesky third world peoples off of their ancestral lands, so rich in natural resources, in the process. I think Alexander Cockburn is right. This goes back to the papal indulgences;
In a couple of hundred years historians will be comparing the frenzies over our supposed human contribution to global warming to the tumults at the latter end of the Tenth Century as the Christian millennium approached. Then as now, the doomsters identified human sinfulness as the propulsive factor in the planet's rapid downward slide.
Then, as now, a buoyant market throve on fear. The Roman Catholic Church sold indulgences like checks. The sinners established a line of credit against bad behavior and could go on sinning. Today a world market in "carbon credits" is in formation. Those whose "carbon footprint" is small can sell their surplus carbon credits to others less virtuous than themselves.
And how ironic that James Cameron, writing for Time,
hailed Richard Sandor a "genuine pioneer" who "harnessed the power of
financial incentives." (10) Two years later, Avatar would be
released.
How deep it goes ...
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1- (http://en.wikipedia.org/wiki/Blythe_Masters - http://cla.umn.edu/news/clatoday/spring2002/sandor.php)
2- (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aXRBOxU5KT5M)
3- (http://www.marketswiki.com/mwiki/Chicago_Climate_Exchange - under "History")
4- (http://en.wikipedia.org/wiki/Joyce_Foundation - under "Governance" )
5- (http://en.wikipedia.org/wiki/Generation_Investment_Management)
6- (http://en.wikipedia.org/wiki/Chicago_Climate_Exchange - 3rd paragraph ... http://www.humanevents.com/article.php?id=22663 - under "Gore's Circle of Business" ... 7th paragraph)
7- (http://www.reuters.com/article/idUSTRE53N6YO20090424)
8- (http://motherjones.com/mojo/2009/04/swine-flu-bringing-home-bacon)
9- (http://www.democracynow.org/2008/10/7/the_tyranny_of_oil_antonia_juhasz)
10- (http://www.time.com/time/specials/2007/article/0,28804,1663317_1663322_1669930,00.html)
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