Yep thanks DR!  Good warning.

Let us imagine, how would a hedge fund set up a scam to incorporate the McCain plan?  Following the past models of hedge fund bubble inflation market manipulation.  Mainly the most recent bubble, that caused the global credit ctisis and our present economic problems here in the US.

I think contractors would be set up to contract, sub-contract, sub-sub-contract...all the way down to the farmer burning jungle and planting trees, for instance as in other offset scams.  

Contracting companies set up in  in multiple levels by corporate cronies (as in iraq contracting and sub-contracting), then "profits" would be accrued at each stage.  These companies would be easily manipulated in terms of "earnings expectations", depending on contracts with each other.   One company would get a big boost for "offset management fees", to coin a likely scam phrase.

Inside information on these chains of companies could be used to manipulate trading.  A bubble, ultimately feeeding on consumer electricity prices, for instance, could reap huge windfall profits for the scammers.  As it did in the subprime mortgage scam.

Would any trees be planted or jungle burned?  As a worse than fake "offset"?  Probably a few demonstration projects for politicians to junket ..in some tropical paradise?  Yep.

The jet fuel they would use to junket producing 100 times the GHG that the jungle burning/tree planting does.

I would rather see any money charged for GHG emission spent paying people to produce power from their home solar panels.  At the rate of 10 cents per kwh.  No scams, no trades.  Just the cash for the GHG free grid power.

Take the cash from industry subsidies, write a check to a homeowner, to help pay for their solar panels.  Or farmers to pay for biogas power plants to back up the grid.  Or wind farms on their farm.  

OPEC meet farmer Brown, he is going to be eating your lunch from now on, hehey.

http://amazngdrx.blogharbor.com/blog

...with the dramatic upward shift in demand?

I mean, I know there are plenty of possible offset projects, both domestic and abroad, but we're talkin' some serious polluters here...like in the billions-of-tons-of-GHGs-range big.

One would think that'd fill up the available credits fairly quickly and costs for new credits would rise as demand outstripped supply (temporarily, at least).

When prices did start to rise.  Then cries to cancel the whole scheme would cause panic selling.  Hedge funds make money on both ups and downs.

http://amazngdrx.blogharbor.com/blog

Yeah, the price of offsets would increase, but alongside that would be intense pressure on the CCCC to ramp up their approval of low-cost offsets. I don't see how you're going to avoid getting lots of crap offsets in the mix.

grist.org

David:
You have this one wrong.
The goal is not, I repeat not,high price carbon allowances.  The goal is to reduce carbon emissions at the lowest possible cost, preferably with a profit.  Climate change is a world problem, requiring optimal solutions - i.e., solutions that reduce carbon and save money.  If the US forces very high price carbon reductions, which nations are going to emulate our policies when the see that those policies tanked the economy?

Who benefits from selling allowances to the inefficient coal plants?  Answer: every producer of clean energy, whether renewable, more efficient combined heat and power, recycled industrial waste energy, or something we do not yet imagine.  Every opportunity to sell excess emission credits improves the prospects for building clean energy, which is good.  Wall Street likes this not because of the relatively small profit potential from organizing trades, but because it minimizes the costs of reducing carbon.

Finally, I submit that neither the 'love' lavished on democrats or the distrust of republicans on global warming control is warranted by the facts.  No administration since Eisenhower has done anything to improve utility efficiency.  The Senate resolution to oppose Kyoto was almost unanimous.  No administration has proposed anything very bold, and we are clearly on a course of leaving no child unharmed.

We must focus on solutions, not knee jerk against any suggestion because of who said it, and avoid using climate as a bargaining chip for partisan politics.  The parties have to come together on climate.

We need Senator McCain to move to full output allowance standards on all four pollutants, then have the Democrats agree to use output standards to replace the counterproductive New Source Review Standards that bar investments in efficiency.  Finally, we must stop the Warner Lieberman approach of buying votes for a very bad allowance approach with gifts of carbon allowances to every vested interest, but no allowances to new clean energy.

Tom Casten

Tom Casten, Chair, Recycled Energy Development LLC

So what if

They put in a carbon permit system.
(Fixed number of tradable permits)

And separately, created an offset rebate program paid for by permit revenues.

By seperating the two, you could be pickier about what qualifies as an offset, and hopefully shift the burden of proof.

Even if you could spoof offsets with that system.

Unless the spoof went to pay for buying carbon permits, it wouldn't really affect the permit system.

_

Oh yeah, and auction the permits, since there's a fixed number of em.

Maaaybe include a year-to-year permit banking system as well.  Maybe.

My opposition to using offsets for 100% of cap-and-trade compliance is not "knee-jerk." In fact, I wrote a rather long post explaining the reasons for it! It's not that I want permits to be expensive for its own sake -- I just don't want them to be cheap because the market is flooded with bogus offsets. And I don't want new dirty coal plants getting built, period.

GreyFlcn, if emission reductions outside the covered sectors could be validated with enough certainty to qualify as offsets, why shouldn't they be covered by the program itself? That's the key question.

grist.org

If you could qualify for an offset, and you wanted to use it to displace carbon emissions elsewhere.

They could just apply those rebate funds to buying carbon permits.

The benefit being though that bogus offsets would most likely pocket the rebate money, rather than purchasing carbon offsets with it.

_

The reason for the split though is to try to keep a tighter grip on the allowable annual carbon emissions.

So fix the rules to completely avoid 'bogus offsets'.  If emitters cannot purchase carbon offsets, then clean plants cannot sell carbon allowances.  Unless the value that clean plants create by not emitting as much carbon per unit of output is available to the clean plants, those plants will not be built.

As Shaw said, be careful what you wish for.  Be especially careful about supporting a system of carbon penalties that does nothing to fix the underlying problem of excessive carbon per unit of output.

Tom Casten

Tom Casten, Chair, Recycled Energy Development LLC

"...fix the rules to completely avoid 'bogus offsets'"

It's not clear how rules could be instituted to do this.  Would every tree planting scheme be examined? If a scam company was uncovered, how would funds be recovered?  

As with the subprime mortgage bubble, the cash stolen by hedge funds isn't coming back, it's squirreled away in the international banking system.  "Laundered" by now, and being used to create new bubbles in grain prices and corn farmland as hedge fund manipulators take advantage of agribizz ethanol fuel farming subsidies.

Why not just divert subsidies that now go to coal, nuclear, oil, and asgribizz energy industries directly to investors in renewable/conservation technology.  A 10 cent per kwh subsidy would create a gold rush.

No new taxes that way.  Just divert subsidies undeserved by the mature industries with record profits, to GHG-freeing emerging energy industries.  

http://amazngdrx.blogharbor.com/blog

A system that would avoid bogus offsets would be a bottleneck -- it would not be able to validate enough offsets, fast enough, to serve the cost-control function McCain is trying to make it serve. Any system that was fast enough would be so by lowering quality control. Offsets just can't do what McCain wants them to do here.

Tom, clean power plants are covered under the cap-and-trade system -- they won't be the ones generating offsets. The offsets, at least as McCain is envisioning them, will come primarily from the U.S. ag sector and from overseas (the CDM -- which is notoriously squirrelly itself).

grist.org

An interesting thing about the system I proposed (Auction&Rebate)

Is that if a coal utility wanted to just plant a bunch of trees, they would need to finance the planting themselves, and couldn't claim the return until they actually created the carbon storage decades later.

This system would actually favor a coal plant to invest directly on maintaining profitability.  Which means that efficiency retrofits would be the most direct and immediate method.

Which ultimately seems like a better approach to me, since the goal isn't "Carbon Nuetral".

The goal is "Carbon Negative".