Ma Beckett's Legacy - A fucked over ETS market and soaring energy costs

Camilla Cavendish ( a ravishing blonde judging by the byeline in Thursday's Leader page of Rupert's Rag the Times) has almost caught on to the nonsense of the EU Emission Trading System - Ma Beckett's legacy at DEFR.

" ...a prime example of ineffective bluster has been the EU's scheme for emissions trading.... What matters for global warming is whether greenhouse gas emissions are falling. And they're not"

What has esacped the sultry pouting Camilla (not to mention sultry pouting Margaret Beckett) with her deep beguiling eyes, is the fact that the architects of the ETS couldn't give a flying fuck about carbon dioxide concentrations, global warming, rising sealevels, emissions from power station , nocturnal or otherwise. What they deeply care about, the lawyers, the accountants, the merchant bankers, the consultants, the hustlers of very expensive weekly tipsheets serious analytical real time comment is MAKING MONEY - PREFERABLY LOTS OF IT.

The carbon market is merely a device to shuffle the worlds money, the stuff you shovel into pension funds, hold on deposit in the bank, the building society, your Mutual fund, hedge fund through the hands of dealers who willingly and with a smile take their commission, margin and profit.

The traded unit is a tonne of carbon, (EUA = EU allowance) produced by a producer of carbon dioxide in excess of their permit. Produce a tonne more than allowed and you pay the EU a tax of Euros 40 so the idea is you buy the unused tonnages (the EUA's) from someone who has underperformed. The broker sits in between (courtesy Ma Beckett) and peddles the differences.

Another example perhaps easier to comprehend is the Milk Quota scheme which has been operating for a very long time.

1. Every farmer is given a milk quota of (lets say 100 gallons).
2. Farmer A through better breeding , feeding produces 200 gallons.
3. Farmer B is idle, incompetent, stupid .. and greedy "sells" (or better still "rents" his quota to farmer A, (broker Y arranges the deal and takes let's say 5% of what A pays B.

Result, the market still gets the milk, but has to pay Farmer B, through higher wholesale and eventually retail prices for milk - Farmer B sits on his arse and draws a wage.

The carbon market is much more complex (sophisticated say the denizens of this jungle). Remember the Financial markets are casinos. They are merely well dressed and often highly educated gamblers - usually gambing with someone else's money and merely ladling their share off the top on every deal, buying or selling.

Gambling is universally enjoyed (Ask Tessa Jowell). However as the punter craves excitement and the book keeper wants more profit, devices are produced to satisfy both.

For example take horse racing

1. You can bet that Horse A will win. You place a bet, the odds of which have nothing to do with the likelihood of it winning but merely reflects the market view, as the amount of money staked on each horse, which is why 33-1 winners keep cropping up. The Gubment takes their share by a tax.

2. To add to the excitemtn you can bet on a place and get reduced odds 1.e 2nd pays 1/2 odds agreed on stake etc., - Bookies milk the market for big (i.e popular races, the derby) extending this to 4th place.

3. On top of this all sorts of "derivatives" arise on horse racing , Doubles, Trebles, Yankees , simply to raise the excitment (enjoyment ?) of the punter and the income of the bookie.etc.,

In football you can bet on the time, kicker of first goal, corner, person sent off, injure whatever.

Just so the Carbon market - and here is where the real money is in the carbon market.

The core market exists in 5 European trading centres who buy and sell the basic contracts , the big players use those prices as their benchmarks.
For example Dresdner, Kleinwort, Wassserstein (DRKW) the investment bank arm of the huge Deutsche Bank have introduced 2 products - because the world is split up into 2 sorts of investor (punter / mug / gambler / hedge fund manager ).

1. Those who think the market price of carbon will go DOWN
2. Those who think the market price of carbon will go UP

Expect the carbon price (EUA) to go DOWN, then DRKW will sell you (from 29th May) a "Knock out" put Warrant with a strike price of Euros 50 to expire on 3rd December 2007, the issue price is based on the EUA price on the Leipzig based European Energy Exchange (EEX) price. In other words the warrant is inversely linked to the carbon / EUA price.

How does this work / How do I make a profit ? DRKW charged on issue date Euros 30.95 ( Face value Euros 50 less that days price Euros 19.05. As the price of the EUA falls the warrant price goes up.i.e if the EUA drops to Euros 10 then the Warrant has a value of Euros 29.05. As the warrant is tradeable on the (regulated unofficial Freiverkehr in Frankfurt) or the EUWAX European Warrant Exchange, you can realise your trading profit, paying a modest sum to DRKW for their endeavours of course.


Expect the carbon price (EUA) to go UP, then DRKW will sell you (from 29th May) a "tracker certificate" at Euros 19.95 on issue date from 29th May of Euros 19.95. As the price rises the Warrant value will increase and again can be traded and profit taken.

What if the price doesn't go UP/DOWN as you expect. Well you are fucked, you have a piece of paper that has no worth , no assets, no value but which you can sell to somebody else assuming there is someone wanting to buy it.

... and DRKW , well they don't give a fuck if the price goes up or down, they draw their commission ( and beady eyed readers will note that the "Knock out" Warrant was using a price on issue of Euros 19.05 and the Tracker Warrant was using a price of Euros 19.5 - that Euros 0.90 "spread" is also an element in DRKW's humble margin.

This is a single example of just one "derivative" that your pension fund manager is gambling in putting your money into, either directly or via investment into another fund / hedge fund or through a bank deposit.

All this activity does not affect the price of EUA's , the production of carbon ...it is merely an accepted benchmark to allow a very small number of very rich people and institutions to cream off immense sums of money for themselves.

Does it cut carbon emissions ? ... NO
Does it cut the costs of energy? ... NO
Does it drive investment on carbon reduction / clean delivery ? ... NO. See FOOTNOTE

APOLOGIES

I must apologise if this is a tad complicated . There is a reason. Banks have tremendous security and so it is difficult to steal money from them using guns and masks (unless of course it is situated in Belfast) so it is a lot easier to steal money from the banks customers by computerised money transfer and couple of telephone calls.

I also apologise on the behalf of Ma Beckett who so enthusiastically endowed you the taxpayer with this fraudulent scheme which has been so helpful in "forcing" the major power utilities (curiously, owned by German and French companies) to increase the charge for gas, and electricity to your home ever since this insane scheme started.

Effectively she has placed a tax on every energy consumer, a tax that doesn't go to the Gubment but to the serried ranks of lawyers , accountants, traders, bankers , consultants .... God Bless her.

WHERE ARE THEY NOW ? MA BECKETT

She is now the Foreign Secretary who is now telling Prime Minister Olmerde to show restraint whilst he kills the Palestinians in Gaza, much as one might shoot fish in a barrel, or the Marronite Christian militia shot Palestinians at the Sabra and Shattila refugee camps whilst Ariel Sharon stood and watched.


FOOTNOTE

The UK Gubment paid for a survey to see how the scheme was working, this was before the market collapsed in April (published 30th May 2006) "Business views on International Climate Change and Energy Policy" by the UK Business Council for Sustainable Energy and The Climate Group. Conclusion ... " the emerging carbon price is not seen to be long-term enough to influence strategic decision-making, for example, over investments into new plant. This is compounded by the high level and volatility of gas prices."

"The EU ETS is seen as likely to survive independent of Kyoto, but be weaker without it and may so may eventually wither away."

" .... a few (companies) are of the view that the EU ETS would not survive."

" one company descriptively called the UNFCCC administration (organisers and bureaucrats who administer the ETS) as a ‘time intensive, lawyer invented scheme, with benefits to a lot of consultants".

"The political assumption that ETS, because it is set in legislation, will outlast changes in the international framework, is not a given for business. At least some assume that with a crumbling international regime, the ETS will be allowed to quietly fold, given that EU legislation is subject to national politics."


Well done Ma ... you dumb bitch.

The UK Business Council for Sustainable Energy was launched in 2002 bringing together the key players in the UK energy sector, to enable a high level policy dialogue with Government on climate change, and the transition to the wider use of sustainable energy.

The Climate Group is an independent, non-profit organization dedicated to advancing business and government leadership on climate change. Based in the UK, the USA and Australia and operates internationally.

She's in Washington today telling Contileezza Rice that "Climate change" is the most important thing in world affairs ... Go and tell that to the Palestinians caught like rats in a trap in Gaza. Has this woman no moral compass ? She was in Chicago at the Mercantile Exchange, probably trying to set up a futures market in dead Palestine Babies. Some people from Israel have already made a kiling in the market.