Diary of an Acclimatised Beauty: Orienting

‘Après is so passé’, and now it’s all about how you’re getting where you’re getting so bonjour Orient Express! Tomorrow I’m meeting friends at Coerchevel where I am going to ski and eat everything! Taking the train made so much sense especially when I am paying carbon offsets for flying anyway. I’m all for conserving but boat travel á la Greta is just not an option for most of us. 

Speaking of most of us… the entire environmental industry is still reeling from John Kerry’s remark after taking a private jet to a climate conference and saying, ‘It’s the only choice for somebody like me’. I mean, UGH! Why couldn’t he just shut up? But blab he did and now it’s putting all of us under a microscope. It’s so unfair because carbon offsets are not even mandatory and yet we pay! 

Thieves like us.

But enough of that because it’s not every day one takes the Orient Express, and you can bet I’m making a big deal of it by being photographed the minute I arrive. Thankfully we (me and all of my besties) reserved Courchevel early on, because Leysin had only a small patch of artificial snow and Gstaad only had 16 of 70 trails open. How embarrassing! 

I was halfway through my first bottle of Veuve Clicquot when I overheard two bright young things talking about whole swaths of yellowed grass on the Vaud Alps where they’d just left. Even the sound of it was distasteful. Of course I felt for the poor darlings but why would you even say such a thing out loud? And yet one went on about having found no decent skiing on the East Coast. Ah—Americans! And they were clearly idiots. Anyone following Davos knew they had to offer alpine bike trails to provide an activity on a snowless Christmas Day. 

I had just one bit of work to do and that was to figure out what (if anything) was to be done about the U.S. subsidy for electric vehicle batteries. Truth is I’d worked damned hard to see that each new battery built in the U.S. would be subsidised by 35 percent—which was accomplished, so I really didn’t understand the problem. Oh how I didn’t want to call my father but who else does one call when your opening line is I know I did a fabulous job so what’s the problem?

Maybe I’d ask the Americans. They were so loud I would easily find an opening. ‘Cheers!’ I began, lifting my champagne coupe. ‘I couldn’t help but detect a sight American accent (I lied) but you look so very European’ (a double lie). But they just began a repeat of the no-snow on the east coast and yellow alps story… I sipped my champagne and listened. 

‘Surely due to climate…?’ I baited. But no takers. A bit more small talk… mention of my own Tesla back in California, and then I tried ‘Such wonderful news that the U.S. is soon going to lead the world in Electric Vehicle production…?’ They didn’t care one bit. If the car was cheaper, they were happy, and they mentioned something about damage to the environment from used EV batteries.

No snow in Kitz, either.

I had to call my father. ‘Before you start…I have just one question’ I said. 

‘Before I start?’ Daddy asked. ‘I was just going to comment how clear and carbon-free your voice sounded from the train’.

Of course he had to get one in… ‘No, I think that’s from three bottles of champagne’, I lied again. ‘What I’m asking is how can it possibly be a bad thing if the subsidised battery program is a bigger success than our wildest dreams?

‘Define success’, Daddy said.

‘Well, 35 percent of every EV battery manufactured in the U.S. is going to be publicly funded… lower prices—more electric vehicles. It’s a win-win! AND the program is turning out to be four times more popular with manufacturers than imagined so… EXTRA WIN!’

‘Well, three things I would point out’ Daddy began, ‘if electricity for charging wasn’t itself fossil-fuelled, and if the discarded batteries didn’t present an environmental nightmare then… MAYBE WIN. Except with four times the success you now have four times the fossil-fuelled electricity being used. And don’t forget that your beloved California asked EV drivers not to charge when the power grid was overtaxed. Imagine four times the overtaxing’.

‘Oh blast, Daddy! When you put it that way—I get it, but most people don’t care. They just want cheaper gas, and we will find some way to make clean power eventually’.

‘Eventually? How fascinating’. He scolded. ‘And you had cheaper gas until you shut down my pipeline’. I knew he was right but I didn’t know what to say.

The good old days?

‘And if your program is four times more “successful” as you say, Jennifer, it just got four times more expensive. You have to understand the money crunchers determined this would cost taxpayers $30 billion over ten years, but last year alone manufacturers claimed $73 billion. Add to that all the foreign manufacturers that will show up with their eco-hands out and it is at least $140 billion’.

‘Okay, Daddy but if it just costs more…’

‘Jennifer don’t say just! And more isn’t better! It means taxpayers were tricked into a program that now costs four times more, but the obvious problem is that you and your fellow green-niks go on thinking that if it has even a possibility of helping the environment then it must be good. I just pointed out to you how it is not a bit better, and where I really lose my patience is when you imagine this has some value. Don’t assume that everyone agrees with you, but even if, it meant less carbon, which I’ve just pointed out it does not, IDEAS, unless monetised, have no intrinsic value! What you have is nothing. It’s less than nothing. It is taking money for actually nothing. How do you not see that? Honestly Jennifer, It’s worse than Denmark claiming to be renewable when they are entirely subsidised’. 

‘Okay, Okay. I hear you. Now what?’

‘Well for you and yours it IS a win-win. Your clients can claim to care, and have their businesses subsidised’.

This hadn’t gone well. I went back to the bar to consider another bottle of champagne. The bright young things were asking to be seated for dinner and by the looks of things the bartender was relieved. I wanted to text Daddy to say something but I didn’t know what. It can’t be easy for a geophysical engineer to have a daughter like me. As I was thinking of what to say I got a text from him:

‘I do hope you haven't forgotten that General Motors recalled all 141,000 of their Chevy Bolts'.

On second thought, maybe I am exactly what he deserves. 

The Great Carbon-Credit Caper

Former chairman of something called the Emissions Reduction Assurance Committee, Professor Andrew Macintosh, recently spilled the beans on Australia’s issuance of carbon credits. Such credits are issued under the auspices of the Clean Energy Regulator by the Emissions Reduction Fund; part of the growing multiplicity of government climate agencies. He claimed that Australian Carbon Credit Units (ACCUs) were, among other rorts, being issued to beneficiaries for growing pre-existing trees.

What a surprise! Rorts galore when governments give out freebies for intangibles. For growing trees that were already grown. For not cutting down trees that were not for the chop. For land revegetation that was going ahead anyway. For not clearing land already uneconomic to clear. For energy efficiency measures, which otherwise form part of continuing efforts by businesses to lower their costs.

According to the World Bank (March 2022) there are sixty-five carbon markets operating either on a national or subnational level. As of 2021, these markets reportedly covered only 22 percent of CO2e emissions (the “e” referring to carbon dioxide equivalent emissions of all greenhouse gasses). Plenty of scope for growth and an inexhaustible supply of (internationally-sellable) carbon credits to emerge out of thin air. How then do you keep their price up, which presumably is the goal in order to keep emissions down? There’s the rub. You can see why green activists don’t much like carbon pricing. Paying a pittance to “pollute” isn’t in their playbook.

Would that it'were so simple.

Australia doesn’t have a cap-and-trade carbon market like, say, California, which forces emitters to buy carbon credits or face penalties. It doesn’t matter. In these days of woke, who needs compulsion? Corporations are terribly anxious to reduce their “carbon footprints.” And major institutional investors act as compliance scolds. Thus, there is no shortage of buyers. But, as in all markets, supply and demand reign supreme; and, other things equal, more supply means lower prices. Take a recent Australian development.

Initially, ACCUs could only be sold back to the government. Since early March they’ve been sellable on the open market. More supply. The result, a plunge in prices from over A$50 per metric tonne of CO2e to around A$30. As in Australia, as in the world.

Generally, companies will be able to buy carbon credits issued by foreign jurisdictions to satisfy their domestic (legal or self-imposed) obligations. Where developing countries are involved, this cross-border carbon-credit market is overseen by the U.N.’s Clean Development Mechanism; ensuring that carbon credits have been properly generated by genuine carbon-offset projects. Laughing verboten.

I googled the price of carbon credits. Got a range of from €107 per ton in Switzerland to €2.80 in Mexico. What’s going on? What’s going on is that this market is like no other. It’s a market devoid of proper underpinnings.

Adam Smith nailed it. People acting in their own self-interest to make what other people will buy at a profitable price serves the interests of everyone. The key to this process of enrichment is twofold. First, making things that people want in order to satisfy their real needs (bread) and desires (fast cars). And, second, investing effort and resources into making those things. Artificially creating needs and desires out of a cultish, pseudo-scientific, political movement (carbon credits) and then conjuring them up out of nothing is something, all right; but it isn’t the kind of market Smith would have recognised.

Economists of environmental bent are usually of socialist mindsets and disdain the market. Yet, when it comes to climate change, they see the market as saviour. Take American economist Joseph Stiglitz and British economist Nicholas Stern; the first a Nobel Laureate, the second a Lord. They must know a thing or two? Think Orwell and very intelligent people.

In 2017 they came up with a target price for CO2 emissions of from U.S. $50 to $100 per ton by 2030 to stem global warming. I have no idea from which model they sourced this rather wide price range. In any event, they’ve been overtaken by events. According to a Reuters poll of “climate economists” in October 2021, we need a carbon price of at least $100 per ton right now (or right then) to achieve net-zero by 2050. Expect it only to go up. My proposed new economic law: "When the goal is infeasible, there is no upper limit on the price required to achieve it."

A question: how is supply and demand for carbon credits to be orchestrated so as to produce a global price of at least $100; in America, in Europe, in India, in China, in Africa? Answer: With uncommon difficulty. Australia’s Clean Energy Regulator promises to establish a carbon exchange by 2023 and to reduce the time it takes for eligible projects to receive ACCUs.

Facilitating a carbon exchange and increasing the supply of ACCUs will support business and governments in delivering against their voluntary emission reduction commitments at the lowest possible cost.

There you have it, “at the lowest possible cost.” No wonder green activists are skeptical. Bear in mind too that every man and his dog in every corner of the world will want to wangle carbon credits to collect a dollar by selling them.

Tesla receives carbon credits gratis from California and a number of other states for doing what it does; making and selling electric cars. Reportedly, it sold carbon credits to the tune of $518 million in just the first quarter of 2021 to other vehicle manufacturers in need. Watch how this boondoggle unravels if new electric car sales (now about 4 percent) reach anywhere near the U.S. government’s target of 50 percent by 2030.

Short of the realisation of a Klaus Schwab wet dream of one-world government, there is no practicable way for a myriad of carbon schemes to orchestrate an equilibrium global price of $100 or more (plus inflation?). Price falls out of supply and demand. Supply will be subject to the rules of different regimes, susceptible to rorts. There’s an incentive for poor countries to rort. Demand will equally depend on the rules of different regimes and differing appetites among businesses for voluntary reductions in emissions. And all the while the supply of carbon credits will grow as businesses adopt technologies to reduce emissions and stick out their hands for carbon credits to sell.

There is an intrinsic flaw in this artificial carbon market. It’s part of the house of cards of boondoggles and grift built on the self-evident lie, as it was ten and twenty years ago, and as it will be ten years hence, that climate doom is only ten years away. A movable doom is a wonderful thing.

'Net-Zero' -- a Leap of Faith

Increasingly, the climate-change cult resembles nothing so much as a religion, with Mother Earth substituting for the God of Abraham. Which means that its barely disguised nature worship is nothing new, but merely a reiteration of the most primitive kind of thinking known to man. But who would have thought the increasingly nutty Economist, a once rational British publication, would have fallen so hard for it, or gotten it so right in the very first paragraph of a recent story, only to then spin wildly out of control. So let the fisking begin!

When companies that depend on emissions, such as easyJet, an airline, use offsets sold on private “over the counter” markets to claim carbon neutrality it is hard not to be reminded of the indulgences sold by the medieval Catholic church that helped sinners to go on sinning guilt-free.

Now that you mention it, that's exactly what it reminds most sentient being of. But believing that would be wrong.

But the recent emphasis on “net zero” economies has made offsets central to climate-change plans. In a net-zero economy adding carbon dioxide, or another greenhouse gas, to the atmosphere is only allowed if an equivalent amount of greenhouse gas is removed from it. Offsets already play a role in some international agreements and government-backed programmes.

But wait! There's another "but"!

But the idea of including them in emissions-trading schemes triggers bad memories in Europe. Credits for dodgy offsets helped to undermine the credibility of the Emissions Trading Scheme (ETS) in its early years. International offsets are in the process of being expunged from the ETS, though they are still traded on the Californian emissions market.

In other words, the offset scheme has been "dodgy" thus far, correct?

Despite this rocky start, offset-trading could still work. Indeed, the 2015 Paris agreement already includes rules for how to account properly for offsets, according to Kelley Kizzier of the Environmental Defence Fund, a campaign group. Many of the issues with monitoring offsets come from the fact that offsetting takes place in remote places where the rule of law is weaker, because planting trees and plants requires a lot of cheap land.

Excuses, excuses. Like Communism, which has never really been tried yet, carbon indulgences have been sabotaged by Third World ineptitude, and so haven't really been tried yet. Okay, then.  Just don't tell me there's another --

But it is likely to become easier. Ben Caldecott of Oxford University points out that technology used to monitor offsets has improved. The use of high-resolution satellite imagery means that it is possible to know exactly when a tree is cut down. In theory offset contracts could also be auctioned on mobile phones with payments sent via mobile banking. “We can create smart contracts between a smallholder farmer and a funder where the payment is unlocked if the tree is still there,” he says.

Sounds legit. What do we have to do?

If the world is to achieve net-zero emissions, the only permissible offsets will need to be genuine negative emissions (rather than schemes that simply reduce emissions). This may mean sucking carbon out of the air using machines. A nascent industry aims to do this, but the costs are big. An estimate in 2018 by researchers at Carbon Engineering, a Canadian firm, put the cost of direct air capture between $94 and $232, many times the carbon price in most places.

It is possible that with sufficient investment those costs could fall as carbon prices rise, allowing a “direct air capture” industry to make money by selling credits into emissions-trading schemes. Direct-capture machines are much more efficient in terms of land. Mr Caledcott hopes that Britain, which has said it will leave the ETS now it is no longer in the EU, will pioneer the first net-zero emissions trading system including such offsets.

Remind us again: how much money does it take to determine how many angels can dance on the head of a pin?