Could Cap and Trade Cause Another Market Meltdown? More Derivatives!

You've heard of credit default swaps and subprime mortgages. Are carbon default swaps and subprime offsets next? If the Waxman-Markey climate bill is signed into law, it will generate, almost as an afterthought, a new market for carbon derivatives. That market will be vast, complicated, and dauntingly difficult to monitor. And if Washington doesn't get the rules right, it will be vulnerable to speculation and manipulation by the very same players who brought us the financial meltdown. Cap and trade would create what Commodity Futures Trading commissioner Bart Chilton anticipates as a $2 trillion market, "the biggest of any [commodities] derivatives product in the next five years." That derivatives market will be based on two main instruments.

First, there are the carbon allowance permits that form the nuts and bolts of any cap-and-trade scheme. Under cap and trade, the government would issue permits that allow companies to emit a certain amount of greenhouse gases. Companies that emit too much can buy allowances from companies that produce less than their limit. Then there are carbon offsets, which allow companies to emit greenhouse gases in excess of a federally mandated cap if they invest in a project that cuts emissions somewhere else—usually in developing countries. Polluters can pay Brazilian villagers to not cut down trees, for instance, or Filipino farmers to trap methane in pig manure.

www.motherjones.com...

Excerpt: Are carbon default swaps and subprime offsets next? […] Already, the industry has achieved its main objective: The Waxman-Markey bill would create a big, convoluted market for carbon derivatives. […]"Even in the presence of a tough regulatory system…that is working hard to get things right…lots of counterfeit carbon currency is making it into the system.” Michelle Chan, the investment program manager for Friends of the Earth, believes that if offset derivatives aren’t properly regulated, they could become “subprime carbon"—futures contracts that promise emissions reductions but fail to deliver and then collapse in value. Already, she points out, some banks are bundling credits from multiple offset projects and splitting them into tranches to sell to investors. The same Wall Street players that upended the economy are clamoring to open up a massive market to swap, chop, and bundle carbon derivatives Sound familiar? You’ve heard of credit default swaps and subprime mortgages. Are carbon default swaps and subprime offsets next? If the Waxman-Markey climate bill is signed into law, it will generate, almost as an afterthought, a new market for carbon derivatives. That market will be vast, complicated, and dauntingly difficult to monitor. And if Washington doesn’t get the rules r ight, it will be vulnerable to speculation and manipulation by the very same players who brought us the financial meltdown.

www.canadafreepress.com...

This will create ANOTHER BUBBLE!!! I swear they are purposely trying to destroy this country...and making sure it happens because everything they do is nothing but harmful to our economy.

They are busy now trying to re-inflate the HOUSING bubble and they are failing at that....so let's create a NEW bubble under the guise of the environment?

Say NO to cap and trade!!

Call your Congressman...demand that they don't do this...not only is it going to cost the middle class more money and infringe on their freedoms...it also enables more of the same problem that helps create this gigantic mess!

Call.....email....SCREAM at them....TELL THEM NO!!!!!!!!!

[edit on 1-7-2009 by David9176]

Yep, that is exactly what it will do, except this go around we won't have any money we will all be poor. It will only be a bubble for the bankers.

This bill is nasty nasty. You would think they would have already learned their lesson about the derivative markets. I hope this bill doesn't pass.

reply to post by Hastobemoretolife


It will pass. In may not be in the current form it's in now...but it will pass. We will get something and it's going to be a major failure.

I can see what will happen. The bill will fail in the Senate and they'll just keep working on it...adding more garbage to the bill to buy votes.

What happened with the bank bailout bill will also happen to the Cap and Trade bill......even if people who are calling in against this bill are against it 50 to 1.

reply to post by David9176


Well if it doesn't pass this go around, the ones that want it won't play ball next year seeing how it is an election year. So we will be safe for a little bit. The senate won't vote on this until later this summer or in the fall, then there is also the health care coming up.

I feel like if this doesn't pass the senate it will be dead for good. At least for a few more years.

There is also that suppressed EPA report that is going to make waves also.

reply to post by Hastobemoretolife

I feel like if this doesn't pass the senate it will be dead for good. At least for a few more years.

Well it's going to be the hands of the Democrats since they now have the majority. This would be a MASSIVE....MASSIVE!!!! killer for the entire Democrat party and Republicans know it. It's not a coincidence that Franken now has his seat....it was done on purpose.

The problem is....Republicans are no better.

I HATE our government.....HATE!!! Freaking criminals man......the middle class is dying.

reply to post by David9176


That is the only good thing about Fraken being appointed to the senate is that the Dems have nobody to blame now, the entire thing is on their shoulders.

But there are a lot of dems that are not for cap and trade because it will hurt people in their states. Its going to take a constitutional amendment to get rid of all crap that is getting passed though. If there is even a constitution left.

This bill is essentially the communist takeover of America.

reply to post by Hastobemoretolife

That is the only good thing about Fraken being appointed to the senate is that the Dems have nobody to blame now, the entire thing is on their shoulders.

Yeah, and I think it was done on purpose....this is why Democrats aren't screaming right now saying....we have complete control and we can make the country perfect! They can't...and all they are worried about is their power and office....they can't lose those.

I wonder who they will allow to vote NO this time around...and how many Republicans will vote yes to ENABLE more DEMS to vote NO?

It's a freaking charade.