Suddenly Carbon is a US$6 Trillion Bubble

[mick silver]

Suddenly Carbon is a US$6 Trillion Bubble
By Staff Report
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Carbon-Intensive Investors Risk $6 Trillion 'Bubble,' Study Says ... Investors in carbon-intensive business could see $6 trillion wasted as policies limiting global warming (http://www.thedailybell.com/floatWindow.cfm?id=1919) stop them from exploiting their coal, oil and gas reserves, according to research by the Carbon Tracker Initiative and a climate-change research unit at the London School of Economics. If this rate continues for the next decade some $6 trillion risks being wasted on "unburnable" or stranded assets, according to the report, released today ... – Bloomberg
Dominant Social Theme: Carbon is a plague and we need to wipe it out.
Free-Market Analysis: Suddenly, the reality of carbon investing is sinking in. According to this Bloomberg article, "banks, funds and institutional investors are seeking clarity from government and central banks (http://www.thedailybell.com/floatWindow.cfm?id=2958) about how greenhouse- gas emissions may affect the value of their investments."
Of course, The Bank of England (http://www.thedailybell.com/floatWindow.cfm?id=1860) is involved in damage control. According to Bloomberg, the BOE will "evaluate whether the U.K.'s exposure to investments in polluting industries poses a risk to financial stability" – but only after investors began to demand such a clarification.
The real point of this exercise seems to be to warn Western corporations that they will have to perform a kind of self-limiting exercise to make sure that resources available to them conform to the letter of the law. This is typical of the way Western markets operate now – with government setting the pace and then focusing on ways to bring corporations in line so that the private sector effectively enforces unpopular mandates.
Here's more from the article:
"If the markets carry on regardless, with the regulators looking the other away, they're just asleep on their watch," James Leaton, research director at Carbon Tracker, a project by non-profit Investor Watch, said in an interview in London. "The longer it goes on, the bigger the bubble will get."
Bonds of fossil fuel companies could be vulnerable to ratings downgrades, pushing up their financing costs while equity valuations could plummet as much as 60 percent if industries become less carbon-intensive, the study showed, citing HSBC Holdings Plc analysis.
The analysis shows that 60 to 80 percent of coal, oil and gas reserves of the 200 public companies studied could be unburnable if the world is to curb emissions to limit global warming to 2 degrees Celsius, a United Nations (http://www.thedailybell.com/floatWindow.cfm?id=1848) target.
Even without UN targets, the focus on air quality in nations including China and the U.S., and the falling costs of wind and solar technologies should drive investors to seek low- carbon opportunities, Leaton said.
The report calls on finance ministers to incorporate climate change into assessment of risk in the capital markets and urges financial regulators to require companies to report CO2 (http://www.thedailybell.com/floatWindow.cfm?id=1868) emissions embedded in their fossil fuel reserves. Ratings agencies should address climate change as part of efforts to tackle risk, it said.
Again, what is going on here is a way of ensuring that the private sector falls in line with the goal of eliminating carbon from their processes. Yet the science itself is not settled; there is no sure way of telling whether man-made carbon is heating up the environment, nor whether the environment itself is getting hotter.
In fact, the carbon trading apparatus that was supposed to self-regulate the larger entities has languished. The US shut down carbon trading. Europe's carbon trading marts are gradually fizzling.
This would seem to be a preferred stratagem of those who want to use global warming as a way to enhance globalism itself and to further control corporations large and small.
"I hope this report will mean that regulators also take note, because much of the embedded risk from these potentially toxic carbon assets is not openly recognized through current reporting requirements," Nicholas Stern, who chairs the LSE's Grantham Research Institute on Climate Change and the Environment, said in the statement accompanying the report.
One can see the wheels turning here. Because carbon trading has not proven to be commercially successful and because the whole idea of global warming is extremely controversial, those behind the program will do their best to implement carbon goals using the power of the regulatory state.
Conclusion: This may "work" better than previous strategies but the result will surely be a further impoverishment of Western middle classes. At least now we have a number: Six trillion dollars.

[mick silver]

Time Proclaims the Death of Carbon Marts: Enter Coercion
By Staff Report
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The green jewel was the Emissions Trading Scheme (ETS)—the European-wide carbon market, by far the largest such system in the world. The ETS, launched in 2005, allowed Europe to put a common price on a ton of carbon, which was meant to encourage utilities and factories to reduce carbon emissions in the most efficient way popular ... But the ETS—and carbon trading more generally—is not doing well, and its problems are taking some of the green shine off of Europe. Since its launch, the ETS has struggled, with the price of carbon falling as the 2008 recession and overly generous carbon allowances undercut the market. – TIME
Dominant Social Theme: Market forces can take care of the carbon threat.
Free-Market Analysis: In our lead article, we discussed the way government regulation and market forces were being manipulated to pressure corporations to self-regulate when it came to potential carbon production and resources that would add to it.
In this article from TIME, we can see even more clearly the reasons why it is necessary for the powers-that-be to come up with different solutions. The much touted carbon marts themselves are not working. The US mart failed last year and now the biggest one of all – the European Trading Scheme – is also being seen as a failure.
This is not surprising because there is a good deal of controversy over global warming (http://www.thedailybell.com/floatWindow.cfm?id=1919) and because the markets themselves are entirely artificial creations. No wonder those who built them couldn't get it right. There is apparently too much supply and not enough demand. The result is a continual price drop. Here's more from the article:
America may be a bit of a mess when it comes to climate policy—though that mess has been surprisingly effective in reducing carbon emissions in recent years—but environmentalists could always look across the Atlantic Ocean to Europe, where greens are green, cars are small and global warming actually matters.
Countries like Germany and Spain have led the way in supporting renewable energy, and cities like Amsterdam and Copenhagen put America to shame when it comes to encouraging dense development and carbon-free cycling. But carbon emissions much, which erodes the demand for additional carbon allowances on the market and causes the price to drop.
Prices fell from 25 euros a ton in 2008 to just 5 euros a ton in February. There was a way to fix this—take 900 million tons of carbon allowances off the market now and reintroduce them in five years time, when policymakers hoped the economy would be stronger and demand would be greater. As anyone who's taken Econ 101 would know, artificially reducing the supply of carbon allowances in such a drastic way—something called "backloading"— should force the price back up.
But on April 16, the European Parliament surprised observers by voting down the backloading plan. In turn, the European carbon market collapsed, with the price of a carbon allowance falling by more than 40% over the day. "We have reached the stage where the EU (http://www.thedailybell.com/floatWindow.cfm?id=1891) ETS has ceased to be an effective environmental policy," Anthony Hobley, the head of climate change practice at the London law firm Norton Rose, told the New York Times. The ETS is a mess.
What Hobley isn't mentioning here, but is referred to further down in the article, is that Eurocrats are concerned about burdening the corporate economy. This may sound strange, given that Brussels doesn't seem overly worried about the impact of the millions of regulations that pour out of it every year. But there is a difference: Green carbon regulations affect all parts of the larger economy. Get it wrong and you can turn a steep recession into a generalized depression or worse.
The TIME article does manage to spell this out: "Backloading failed because even in very green Europe, economic concerns seemed to trump environmental ones. European Parliamentary members worried that any action that would cause the price of carbon to rise would add to European industry's already high energy costs."
Okay. While it was contemplated that companies themselves would be on the front lines of carbon reduction, this seems to be a less viable strategy now. Instead, governments are encouraging corporate credit companies like Moody's (http://www.thedailybell.com/floatWindow.cfm?id=28332) to evaluate corporate risk based on their resource base and whether or not there is a significant risk that energy supplies are going to be disallowed by burgeoning regulations.
While the costs would have been passed on to consumers either way eventually, this latter approach (that uses corporate valuations as its basis) directly attacks consumers – for corporations shall surely pass the cost of re-sourcing their energy needs directly on to the consumer within a real-time environment.
Conclusion: TIME concludes that "Carbon markets may be finished. If carbon trading can't make it in Europe, it can't make it anywhere." But as with so many strategies that are designed to reinforce globalism, those behind these schemes are now turning to more direct and blunt means of coercion.

[Horn]

"The longer it goes on, the bigger the bubble will get."

Good post mick, looks like its going to be the final Ace/Wild card that TPTB pull out from beneath table to plunge all the tiny governments to their knees.

[gunDriller]

so now instead of just growing trees, i can be a Carbon Sequester-er ?