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Eco-lunacy: harmful gas deliberately produced to cash in on carbon credits

Economics was memorable labeled ??the dismal science? by Thomas Carlyle, but I??ve never thought it was dismal at all, particularly when considering its basic laws.  It??s fascinating to explore the way government, human behavior, and the principles of commerce interact.  One reason that small government and maximum private-sector liberty are so essential to prosperity is that such an approach is harmonious with the immutable laws of economics, while all other systems of governance amount to doomed efforts at repealing them.

Something as simple as the law of supply and demand is forgotten with surprising frequency by central planners.  It becomes a rake lying hidden in the tall grass of history, which they keep stepping on as they march toward the distant horizon of a heavily regulated utopia.  No one should ever be surprised that large groups of people, including corporate enterprises, generally seek to take advantage of incentives placed before them, without giving much thought to the high-minded rationale behind the creation of those incentives.

Thus we have a delightful New York Times report on the United Nations?? latest encounter with ??unintended consequences,? which should have been easily foreseeable to anyone except an insulated trans-national bureaucrat.

The UN, you see, is still heavily enthralled by the discredited fantasy of ??global warming,? and set out to control it by issuing ??carbon credits? to industrial plants in developing countries.  The idea was to reward them for generating reduced levels of greenhouse gas.  Industrial facilities would be allowed to produce a certain amount of these gases; if they produced less than their quota, they could sell the unused carbon credits to other businesses.

But as the Times relates, manufacturers located primarily in China and India ??quickly figured out that they could earn one carbon credit by eliminating one ton of carbon dioxide, but could earn more than 11,000 credits by simply destroying a ton of an obscure waste gas normally released in the manufacturing of a widely used coolant gas.  That is because that byproduct has a huge global warming effect.  The credits could be sold on international markets, earning tens of millions of dollars a year.?

The upshot is that ??since 2005, the 19 plants receiving the waste gas payments have profited handsomely from an unlikely business: churning out more harmful coolant gas so they can be paid to destroy its waste byproduct.  The high output keeps the prices of the coolant gas irresistibly low, discouraging air-conditioning companies from switching to less-damaging alternative gases. That means, critics say, that United Nations subsidies intended to improve the environment are instead creating their own damage.?  (Emphasis mine.)

Just how profitable is the deliberate production of garbage, for the sole purpose of immediately destroying it?  As a climate negotiator quoted by the Times explained, ??you get nearly 100 times more from credits than it costs to do it. It turned the economics of the business on its head.?

So: an imaginary ??problem? led to a ham-fisted Big Government solution, which created a thriving market for an imaginary ??product? called carbon credits, which exists only because government has willed it into existence.  The easiest way to rake in the chips from this illusory marketplace is to deliberately create a worse-than-useless physical product? because government is willing to pay a premium price for its destruction.  The end result doesn??t even make sense under the terms of the global-warming mythology that set the whole corrupt process in motion.

Naturally, the solution to this little dilemma will involve even more regulations, which are encountering entirely predictable resistance from those who have profited under the old regime.  When I say ??resistance,? I mean certain Chinese plants are threatening to blast greenhouse gases directly into the sky as an act of revenge, if they don??t receive their waste gas credits.  Since these gases are produced under long-term contract, it will take years for any regulations that survive political combat to have any real effect.

The European Union has said it will begin refusing to accept these bogus waste tax credits into its ??carbon markets? next year.  It??s wonderful that the EU can afford to indulge a fake marketplace based on the trading of non-existent goods? while its real markets, filled with useful industries that fulfill genuine customer demand, tremble on the verge of collapse.

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Written By

John Hayward began his blogging career as a guest writer at Hot Air under the pen name "Doctor Zero," producing a collection of essays entitled Doctor Zero: Year One. He is a great admirer of free-market thinkers such as Arthur Laffer, Milton Friedman, and Thomas Sowell. He writes both political and cultural commentary, including book and movie reviews. An avid fan of horror and fantasy fiction, he has produced an e-book collection of short horror stories entitled Persistent Dread. John is a former staff writer for Human Events. He is a regular guest on the Rusty Humphries radio show, and has appeared on numerous other local and national radio programs, including G. Gordon Liddy, BattleLine, and Dennis Miller.

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archive

Eco-lunacy: harmful gas deliberately produced to cash in on carbon credits

Economics was memorable labeled “the dismal science” by Thomas Carlyle, but I’ve never thought it was dismal at all, particularly when considering its basic laws.  It’s fascinating to explore the way government, human behavior, and the principles of commerce interact.  One reason that small government and maximum private-sector liberty are so essential to prosperity is that such an approach is harmonious with the immutable laws of economics, while all other systems of governance amount to doomed efforts at repealing them.

Something as simple as the law of supply and demand is forgotten with surprising frequency by central planners.  It becomes a rake lying hidden in the tall grass of history, which they keep stepping on as they march toward the distant horizon of a heavily regulated utopia.  No one should ever be surprised that large groups of people, including corporate enterprises, generally seek to take advantage of incentives placed before them, without giving much thought to the high-minded rationale behind the creation of those incentives.

Thus we have a delightful New York Times report on the United Nations’ latest encounter with “unintended consequences,” which should have been easily foreseeable to anyone except an insulated trans-national bureaucrat.

The UN, you see, is still heavily enthralled by the discredited fantasy of “global warming,” and set out to control it by issuing “carbon credits” to industrial plants in developing countries.  The idea was to reward them for generating reduced levels of greenhouse gas.  Industrial facilities would be allowed to produce a certain amount of these gases; if they produced less than their quota, they could sell the unused carbon credits to other businesses.

But as the Times relates, manufacturers located primarily in China and India “quickly figured out that they could earn one carbon credit by eliminating one ton of carbon dioxide, but could earn more than 11,000 credits by simply destroying a ton of an obscure waste gas normally released in the manufacturing of a widely used coolant gas.  That is because that byproduct has a huge global warming effect.  The credits could be sold on international markets, earning tens of millions of dollars a year.”

The upshot is that “since 2005, the 19 plants receiving the waste gas payments have profited handsomely from an unlikely business: churning out more harmful coolant gas so they can be paid to destroy its waste byproduct.  The high output keeps the prices of the coolant gas irresistibly low, discouraging air-conditioning companies from switching to less-damaging alternative gases. That means, critics say, that United Nations subsidies intended to improve the environment are instead creating their own damage.”  (Emphasis mine.)

Just how profitable is the deliberate production of garbage, for the sole purpose of immediately destroying it?  As a climate negotiator quoted by the Times explained, “you get nearly 100 times more from credits than it costs to do it. It turned the economics of the business on its head.”

So: an imaginary “problem” led to a ham-fisted Big Government solution, which created a thriving market for an imaginary “product” called carbon credits, which exists only because government has willed it into existence.  The easiest way to rake in the chips from this illusory marketplace is to deliberately create a worse-than-useless physical product… because government is willing to pay a premium price for its destruction.  The end result doesn’t even make sense under the terms of the global-warming mythology that set the whole corrupt process in motion.

Naturally, the solution to this little dilemma will involve even more regulations, which are encountering entirely predictable resistance from those who have profited under the old regime.  When I say “resistance,” I mean certain Chinese plants are threatening to blast greenhouse gases directly into the sky as an act of revenge, if they don’t receive their waste gas credits.  Since these gases are produced under long-term contract, it will take years for any regulations that survive political combat to have any real effect.

The European Union has said it will begin refusing to accept these bogus waste tax credits into its “carbon markets” next year.  It’s wonderful that the EU can afford to indulge a fake marketplace based on the trading of non-existent goods… while its real markets, filled with useful industries that fulfill genuine customer demand, tremble on the verge of collapse.

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