Who Wins in the Carbon Trade?

As the rise and fall -- and ultimate bankruptcy -- of crypto exchange FTX shows, Bankruptcy happens gradually, then all at once. Think of that old adage as we look at the business of carbon credits. Gabon, a relatively small African nation, was featured in a recent Wall Street Journal story about the credits. The west African nation of Gabon, which is on the Atlantic and surrounded by the Republic of the Congo and Cameroon, is described in the story as having 88% of its land covered in forest. Today's climate activists are always lobbying for regulations supposedly intended to cut worldwide carbon emissions, such as carbon credits and/or carbon offset credits. Here's how Carboncredits.com describes the carbon markets: Let's delve into that concept a bit deeper. One company's reduction in carbon emissions can be traded (read sold) to another company that was not able to come in under its allocated limit. What becomes glaringly obvious to me is that total emissions of the two companies combined stay the same. Emitter A has to pay Emitter B, or a carbon trading market intermediary, but I can't see how the world is any better off on balance. What was the point then? If total pollution stays level, then the entire concept of carbon offset trading appears to me to enrich favored government or corporate entities at the expense of less favored organizations. Electric car manufacturers such as Tesla have been huge beneficiaries of this, getting carbon credits for free and then selling them auto companies that still make internal combustion engines. That raised the price of traditional vehicles while not changing anything else. Note, too, that electric vehicle makers also benefit from federal tax credits of $7,500 per car to induce people to buy electric vehicles. States like Colorado and California also add thousands of taxpayer-funded rebates to those buyers, as well. What happened right after Congress extended expired tax credits a few months ago? Major car makers immediately raised prices by about $7,000- $8,000 per vehicle. Consumers didn't benefit. The new multi-thousand-dollar credits went right to the auto companies. The main ways to acquire carbon credits/offsets include renewable energy projects, replanting forests, methane capture projects and direct carbon capture projects. Gabon's claim for selling carbon offset credits is derived for promising to slow, not even extinguish, the cutting of trees already growing there. It looks to me like the nation hopes to reap huge dollar amounts simply by doing little to nothing different than what the country had been doing all along. Gabon's environmental minister said in an interview in the Wall Street Journal, In a self-interested way we're looking at the money. He later added, If Gabon can do it, the DRC (Democratic Republic of Congo) can do it, and Surinam can do it. In essence, it appears to me that these African countries could sell billions of dollars of carbon credits to the rest of the world without doing anything new to reduce emissions. I believe the scheme simply transfers money from more developed nations to less developed ones without changing the behavior of companies at all. Established carbon trading firms are up in arms about this new trend. Gabon and other countries had been taking only a small fraction of the funds generated while using those firms to handle the transactions. Now, though, they seek to cut out the middlemen and keep the lions' share of the profits. The entire carbon trading market was likely designed by accountants, lawyers and marketers who convinced government officials to legislate and demand carbon trading. Politicians couldn't resist free money and the power that came with determining winners and losers based on program rules. It is how they collect tremendous amounts toward campaign funding from lobbyists. Regardless of how you stand on climate change issues, the current system does nothing to accomplish lowered emissions. It merely dictates the movement of money from favored to less-favored entities. Those are my thoughts on the subject. Feel free to lay out an opposing case if you can.

Who Wins in the Carbon Trade?

Here's my take on the carbon trade and why I'd stay far away from it.

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