Cap and Trade or ETS - It's Still A Tax

Governments around the world are talking Emissions Trading Schemes - Cap and Trade in Carbon - all designed to reduce CO2 as a greenhouse gas. But what this shows is the influence of the non-productive, speculation based sector.

An ETS is in fact a tax - it adds the cost of a permit to just about everything, like a GST or VAT.

But an ETS allows the buying and selling of these permits. These permits can be bought from overseas countries, global companies, other States and Governments. Add in the RECS - certificates issued for renewable energy based appliances and electricity generation and you have a whole new stock market of financially valued permits - not with a fixed value, or even a value directly linked to time, or CO2 levels, or sea level rise - but with a value determined by the financial market itself.

Just like the current dollar based financial market - the cost of this new tax will be set by the needs of the speculators, be driven by government financing needs, and will vary wildly according to holidays in major markets, rumours, and gossip - booms and busts just like the current financial markets.

But will an ETS work? The stated aim is to encourage the use of low carbon processes, develop low carbon forms of electricity production, reduce the use of fossils fuels, increase the efficiency of energy consumption, and over time, reduce the level of CO2 in the atmosphere.

As a straightforward tax, it won't unless the tax is large, consistently applied with no concessions, stable in value or cost, and the money raised is put back into infrastructure that meets the stated aims of the ETS.

As a tradeable mix of tax, permits, and certificates - it is hopeless. It will be too small, hugely variable in value (making investment in projects hard to cost), have plenty of loopholes and opportunities for kick-backs and corruption, and highly political in that the money raised can be used for preferential dispersement.

In short, it will be another tradeable commodity designed to enrich the non-productive speculative money markets. A clear case of the real world being parasitised by the unreal.