Tag Archives: carbon price

EU ETS Myths Busted As Carbon Price Collapses; “Should Not Be Replicated”

17 Apr


From Carbon Trade Watch:

…a new report shows that the problems of the EU ETS are systemic and unresolvable. Keeping this failed system in place would further delay real action for reducing emissions in Europe. The report “EU ETS myth busting: why it can’t be reformed and shouldn’t be replicated”, has been published by several signatory organisations from the “Time to scrap the ETS” declaration. It looks at a number of claims made in defence of the EU ETS and shows why they are not valid.

Amusingly, for any readers foolish enough to swallow the Liberal Party’s baloney about their “Direct Action” alternative “solution” to the “problem” of man-made climate change, the report calls for … wait for it … direct action alternatives to emissions trading.

Meanwhile, the EU carbon price has collapsed, after a vote to try and reform the EU ETS failed to pass.  This has ugly ramifications for the already hideous Federal budgeting performance of the Labor party:

LABOR will revise down its carbon tax revenue estimates following a crash in the European carbon market, at a likely multi-billion dollar cost to the federal budget.

The EU’s carbon price sank to 2.55 euros ($A3.24) in trading overnight, as legislators rejected a proposal to save the market from collapse.

The federal budget currently assumes a $29 carbon price in 2015, when Australia’s carbon trading scheme is linked to the EU carbon market.

True to form, and apparently unable to recognise that they are deep deep deep in a hole of their own making, the pig-headed public trough-swillers in the Labor party choose to keep right on digging:

Climate Change Minister Greg Combet told the ABC: “We will continue with our plans to link with the European emissions trading scheme from 1 July 2015, which is still over two years away.”


The bankers, speculators, traders, and assorted financial parasites will be pleased.

In the rigged casino of global financial markets, Volatility = Profit potential

The Financialisation Of Nature

12 Mar

From Carbon Trade Watch:

The banks have successfully infiltrated the international institutions. The creation, and official recognition, of an UNEP Finance branch allows them to promote their private interests as public interests. Central in this strategy is the launch, at Rio+20, of a “Natural Capital Declaration”. What is this? The vision of the financiers, based on the conception of environment and of life as a simple capital resource, and their support for mechanisms that push the financialization of nature.

Infographic: Visualising The Size Of Australia’s Carbon Derivatives Time Bomb

24 Apr

On July 1, 2012, the government’s Clean Energy Future scheme will officially begin.

You know it as the carbon “tax”. It has been called a “tax” over and over and over again, by politicians, economists, bankers, and other vested interests, for a simple reason.

There are many who want you to think that the scheme to “put a price on carbon” is safe; that the government’s implementation of a “carbon price” is careful, methodical, and prudent.  A “fixed price” on carbon dioxide for 3 years. And only after 3 years, a transition from a fixed price to a “floating price” emissions trading scheme.

But there is something very important that they are not telling you.

There is a Ticking Time Bomb Hidden In The Carbon Tax.

It is called “derivatives”.

Carefully buried in 1,000+ pages of legislation, just 2 tiny, opaque clauses (109A and 110) have been included that allow the banks to immediately begin creating and trading unlimited quantities of unmonitored, unregulated carbon “securities” (another term for “derivatives”).

What are “derivatives”?

SHORT STORY: Pick something of value, make bets on the future value of “something”, add contract & you have a derivative. Banks make massive profits on derivatives, and when the bubble bursts chances are the tax payer will end up with the bill. This [graphic below] visualizes the total coverage for derivatives (notional). Similar to insurance company’s total coverage for all cars.

LONG STORY: A derivative is a legal bet (contract) that derives its value from another asset, such as the future or current value of oil, government bonds or anything else. [Example] A derivative buys you the option (but not obligation) to buy oil in 6 months for today’s price/any agreed price, hoping that oil will cost more in future. (I’ll bet you it’ll cost more in 6 months). Derivative can also be used as insurance, betting that a loan will or won’t default before a given date. So its a big betting system, like a Casino, but instead of betting on cards and roulette, you bet on future values and performance of practically anything that holds value. The system is not regulated what-so-ever, and you can buy a derivative on an existing derivative.

Most large banks try to prevent smaller investors from gaining access to the derivative market on the basis of there being too much risk. Deriv. market has blown a galactic bubble, just like the real estate bubble or stock market bubble (that’s going on right now). Since there is literally no economist in the world that knows exactly how the derivative money flows or how the system works, while derivatives are traded in microseconds by computers, we really don’t know what will trigger the crash, or when it will happen, but considering the global financial crisis this system is in for tough times, that will be catastrophic for the world financial system…

Australia’s banks already trade in derivatives. Most of their derivatives bets are on movements in Interest Rates and Foreign Exchange Rates. And they have a total exposure to just these forms of derivatives, that is truly mind-boggling.

The numbers are so big, that no one can comprehend them.

You have to see it for yourself.

First, via the superb demonocracy.info website, here is an infographic to help you visualise what $1 Trillion looks like (click image to enlarge):

Click to enlarge | Graphic source: demonocracy.info

Got that?

$1 Trillion is a lot of money*.

The value of all Australians’ superannuation savings combined, is about $1.3 Trillion. As is the claimed annual “GDP” of the Australian economy.

Now, here is an infographic showing the Australian banks’ recent record high total “Off-Balance Sheet” derivatives exposure.  Remember, this is before the official start of a “price on carbon” allows the banks to start creating and trading carbon derivatives too (click image to enlarge):

Click to enlarge | Graphic source: demonocracy.info | Data source: RBA statistics

I want to emphasise the point made earlier.

Almost everyone incorrectly believes that no trading will happen until 2015. But the truth is, the banks can begin creating and trading in carbon derivatives from Day 1. Even though the scheme is supposed to be a “fixed price” scheme for the 3 years up to 2015.

Those 2 little clauses I mentioned earlier (109A and 110), are the reason why trading will begin from Day 1. Trading in carbon derivatives, that is.

They are opaque, easy-to-overlook clauses stating that the Clean Energy Future legislation does not prevent the creation of and trade in carbon “securities”.

The designers of the legislation (no, not the politicians), know full well that the banking industry can and does create and trade derivatives on everything.

Including the date of your death. That’s right. We have previously documented how banks are trading in Death Derivatives.

All that is needed, is for there to be a “price” put on some thing, effectively making that thing a “commodity”.

Once there is an underlying price, then banks can create a derivative.

Provided there is no law specifically preventing them from doing so.

It is that simple.

And that is why the Clean Energy Future scheme has those two little clauses buried inside. As Explanatory Memorandum 3.36 confirms, they are “included for the avoidance of doubt” that the government does NOT wish to prevent the banks creating carbon derivatives.

That is also why, just 3 days after the government released its draft legislation for “putting a price on carbon”, it was reported that:

Australian banks are eyeing opportunities to cash in on the proposed carbon tax by developing new financial products and services that capitalise on a market seen to be worth billions of dollars annually, according to a report by the Australian Financial Review.

Australian financial firms that have experience in European carbon markets, such as Macquarie Group Ltd, Westpac Banking Corp Ltd and ANZ Banking Group Ltd are particularly keen to establish their presence in the Australian market….

ANZ’s head of energy trading said the value of the derivatives carbon market would dwarf the $10 billion initially raised by the government, according to the AFR.

You have now seen just how mind-bogglingly enormous is our banks’ exposure to (mostly) Interest Rate and Foreign Exchange Rate derivatives.

$17.93 Trillion is equivalent to nine (9) skyscrapers made of pallets of $100 bills, each towering more than twice the height of the Sydney Harbour Bridge.

The $10 billion that the government will raise from forcing companies to buy carbon permits – the basic mechanism for “putting a price on carbon” – is almost nothing compared to the value of derivatives that banks will create and trade.



Off-Balance Sheet.

The government’s claimed $10 billion in expected revenue from the Clean Energy Future scheme, is equivalent to just one (1) of the 10 x 10 squares of pallets forming the base of one (1) of those derivatives skyscrapers pictured above.

That’s one (1) storey in two hundred (200).

I hope that you now have a better idea – a clear picture in your mind’s eye – of what the ANZ Bank’s head of energy trading meant, when he gleefully said that the value of the carbon derivatives market would dwarf the $10 billion initially raised by the government.

A government that has followed the lemming-like lead of Ireland, by explicitly and implicitly putting taxpayers on the hook for the deeds (and misdeeds) of the banks, by placing the nation as guarantor for the solvency of the Australian banking system.

Meaning, just like the rest of the West, our banks are Too Big To Fail.

And from July 1, thanks to the Clean Energy Future scheme and those two little clauses, the government has handed the banks a licence to print.

It is really a licence to kill.





* If you wonder how it is possible that banks can have so much money just in derivatives bets, you might like to learn the truth. The “money” does not really exist. Almost all of the “money” in the world, is just electronic code in computers. And banks truly rule the world, by creating “money” (digits in computers) out of thin air, and lending it to you, at interest. Even the biggest central bank in the world, the Federal Reserve Bank, has admitted that this is how banking works. Learn more here.

Tax Junkie Wayne Can’t Find A Vein For His $60m Hit

23 Nov

Yes dear reader. There really are impossibly boring folk out there like your humble blogger, who are actually looking forward to Treasurer Wayne’s Mid Year Economic and Fiscal Outlook (MYEFO) statement.

Not happily mind, but with a kind of morbid fascination.

As we saw recently, Wayne’s Budget Is Already Shot To Hell. Even though he only presented it 6 months ago.

Unsurprisingly, the “truly extraordinary” growth forecasts underpinning the predicted budget surplus in 2012-13, have already proven to be about as accurate as a spirit level minus its bubble.

The company tax growth prediction – shot.

The income tax growth prediction – shot

The superannuation tax growth prediction – shot.

The jobs growth prediction – shot.

But wait … there’s more!

China slowing.

EU collapsing.

USA drowning.

Iron ore and coal prices plummeting.

House prices leaking.

Now the chills and sweats are breaking out. And the panic is on for a quick fix.

No doubt the pushers from Treasury are with Wayne right now, desperately trying to keep the fantasy going, by massaging the numbers back up.

Like a junkie who’s shot so full of holes, he can’t find a sound vein anywhere.

And the MYEFO massaging will be only the more frantic, now that Wayne’s just scored another $60m hit:

A carbon price will add about $60million to the cost of the Federal Government’s operations, and agencies are unlikely to be compensated for it.

The Canberra Times analysed emissions from the bureaucracy and the military to estimate the budget hit they will face in 2012-13, when the price and its related fuel tax increases take effect.

The Government, which is Australia’s biggest energy user, has not yet prepared its own calculations.

The cost will grow each year as the carbon price rises and as fuel tax credits fall, unless government agencies cut their energy use significantly.

The Climate Change Department confirmed the military and the public service would ”incur a financial effect as a result of the changes”, but neither it nor Treasury could say what that effect would be.

The military will shoulder most of the burden, as it accounts for about two-thirds of government energy consumption.

Opposition environment spokesman Greg Hunt said yesterday the $60million estimate showed the ”real cost” of the carbon price remained hidden.

”Either the Government provides more taxpayer money to cover the carbon tax cost of these departments, or services will have to be cut. Or we see another budget blow-out as the Government fails to think through the consequences of the carbon tax on its own departments,” he said.

However, Greens deputy leader Christine Milne said there was no need to compensate the public service, which should instead focus on using less energy.

The estimated extra costs represented just 0.1 per cent of agency spending, she said, ”and will be dwarfed by fluctuations in the value of the dollar or the price of oil”.

Which comment only goes to prove what total and utter economic imbeciles the Greens are (or, they think we are). Consider: If it’s true that an extra $60m in govt costs for energy “will be dwarfed by fluctuations in the value of the dollar or the price of oil” … then how screwed will we be, when their “fixed” CO2 price is floated and thus exposed to the wild fluctuations of international carbon and currency markets?!  Indeed, how screwed will we be from Day 1, when our highest-in-the-world CO2 price is “fixed” in AUD for 3 years, and the backside inevitably falls out of a debt-swamped (take your pick) European / USA / Chinese economy, taking the FX rate of our speculator-preferred “risk on” Australian currency with it, a la 2008?!

”I hope that, just like companies and businesses across Australia, government agencies and the defence forces will be stimulated by the price on pollution to look for savings they can make through energy and fuel efficiency and improving their buildings and practices.”

Ms Milne added, ”Defence, in particular, should look to the Pentagon and note that the US military is one of the leaders in investing in alternative fuels and technologies.”

Treasurer Wayne Swan would not say if he would compensate agencies. ”Government departments will be, as always, adequately resourced in accordance with the Government’s commitment to strict fiscal discipline,” his spokesman said.

I would like to see the Government’s achievement of strict fiscal discipline, rather than merely a “commitment” to it.  On past and present form, Wayne’s “commitment” to strict discipline is about as believable as that of a heroin addict who’s been given charge of the keys to the methadone cabinet.

But I digress…

The federal bureaucracy is struggling to find savings after Labor’s decision earlier this year to increase the efficiency dividend, a 1.5 per cent annual cut to agencies’ administrative budgets. The Government initially planned to relieve agencies by reducing the dividend to 1 per cent, but the increase will instead cut their budgets by an extra $238.5million in 2012-13.

The fuel used in military operations was responsible for half of the Government’s total energy consumption in 2008-09, the latest year for which data is available.

However, the cost of electricity for light, air-conditioning and power to the bureaucracy’s offices will be most affected by a carbon price, with the Government’s power bills expected to jump $39.4 million next financial year. The second-largest increase will be due to higher aviation kerosene bills, with a reduced tax credit likely to cost the Government $9.9million.

Labor’s carbon-reduction plan involves taxing big polluters, such as electricity companies, $23 for each tonne of carbon dioxide they emit.

Businesses using heavy vehicles, such as trucks, are exempt from the carbon price until 2014, but the Government will gradually increase fuel taxes from July next year.

The Canberra Times’ cost estimate only includes air travel in planes that the Government owns or leases directly, as data on fuel used by public servants on commercial flights is unavailable.

Your humble blogger will be closely examining between the fingers and toes, under the arms and feet, and in the nether regions of Wayne’s MYEFO mini-budget.

Looking for track marks.

The telltale signs of where all the budget “hits” have been hidden from public view.

Mum’s The Word

4 Aug

My dear old Mum has a few choice words for her oceanfront-dwelling, interstate ring-in “local” Member of Parliament using another $4 million of taxpayers’ money to peddle warmageddonist propaganda.

One hopes that green cargo cult members everywhere will applaud her admirable demonstration of the most apropos method of recycling junk mail:

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