Capping (CO2 Emissions) And Trading (Carbon Credits) How It Works – An Actual Case

HOW CARBON CAP AND TRADE WORKS.

This is an actual case.

Compact Fluorescent Light Globes.

An Australian Company is planning to give away 30 million of the new energy efficient compact fluorescent light bulbs.

Here is the link to that article from an Australian media outlet.

This is a great idea, and you might think at first that it actually is an altruistic thing with the high ideal of saving the environment, and the green lobby of environmentalists will be hailing this as a great thing.

However, is it really?

Let’s look at it in some detail, because this gives us an insight into how Cap and Trade works.

This Australian Company will be giving those light bulbs away, in, of all places, Mexico.

Not in Australia, where consumers here are exhorted to replace all their older style incandescent light globes with these new compact fluorescent light bulbs to save on CO2 emissions.

These bulbs cost 6 to 8 times more than the ones they are replacing, and when extrapolated out over your whole electrical utilities bill, the amount actually saved is quite tiny really, as I have explained in numerous posts, and here are links to two of them, the first, and this, the second of some of those posts where I have detailed the actual savings to be minimal, at best.

No! Australian consumers will still be expected to go out and purchase these bulbs, so Australian retail companies, distributors etc will not lose money if the bulbs are just given away here.

It’s still an altruistic thing you say, to be giving away these bulbs in what is considered to be still one of those ‘Developing’ Countries of the World, where the vast bulk of the population lives in poverty, and the money that they do earn would not even be considered for replacing light globes, no matter how much good it would do for the environment in Mexico.

So then, how does this case show us how Cap and Trade works?

These bulbs are manufactured in the main in China. In China because the wages there are a fraction what they are in those Developed Countries, and the overheads are considerably less as well, and those are just 2 of the reasons those large Companies have moved out of our Countries and into these ‘Developing’ Countries.

Those bulbs can be manufactured on a production line for a few cents each. The mark ups then come for packaging in our Countries where they are sold, the shipping, the freight, the wholesalers mark up, and then the retailers mark up, all these adding to the price to bring them up from manufacture costs of a few cents to the price you pay at the retailers of $4 to $8 per bulb.

This Australian Company will be placing a huge order for 30 million of the bulbs, and because it is such a big order, savings will be made because of that bulk order placement.

The bulbs will be manufactured, then packaged, loaded into Shipping Containers, then freighted to the port, then shipped in those Containers to Mexico, then freighted to the wholesaler, then unpacked from the containers, further removed from the bulk packaging, then repackaged for the hardware stores where they will be distributed. Those containers will be part of a huge consignment of containers for shipping, so the costs for shipping will be spread across all those containers, not just the ones containing the new globes.

The globes will be exchanged for free in those hardware stores in Mexico.

CAP AND TRADE.

The savings will be made in Mexico, supposedly from less emissions from power plants, but are those savings of any significance?

Not really. Even though the media release states there will be savings of 8 million tons of emitted CO2, that number, of itself, seeming so huge, amounts to between a third and a half the CO2 emitted from one large coal fired power plant for one year. Mexico generates 85% to 90% of all its consumed power from coal fired sources, so those savings will be spread across the whole inventory of those plants, a little bit here, a little bit there, a little bit from all the vast number of those plants. That 8 million tons (proposed best estimate) savings amounts to just a slight amount less than 1.4% of Mexico’s total emissions from the electrical power generating sector and 0.4% of their overall emissions.

Incidentally, if all those bulbs were distributed in the U.S. than the CO2 emissions savings of that 8 Million tons would amount to 0.22% of the total emissions just from the electrical power generating sector, and 0.05% of all emissions. On a World Total, these emissions savings amount to a saving of 0.01%

The nature of those power plants is that they cannot easily run up and down in their level of power production, because they are such a huge weight for the turbine to be driving. Because of that, those plants just hum along at their most efficient speed all the time, producing power at the same rate all that time. If you were to run the plant down some because of the (supposed) less demand, then when the time comes for them to run back up to speed as demand increases, then a huge amount of extra coal needs to be burnt to produce the greater steam to drive the turbine, hence the dramatic increase in CO2 emissions, so that is why they just hum along all the time at basically the same speed, with as little variation as possible, because that is how they operate within those designed specifications of most efficient operation and running.

The (supposed) less demand will be at Peaking power times, when the lights come on at night, and people arrive home from work etc. At these times, those plants that do come on line are the smaller plants that can run up to speed easily. These plants are those powered by Natural Gas, which produces only a third the CO2 of those coal fired plants on an equivalence basis. Incidentally, those plants used for peaking power are also those renewable plants, like wind and solar, not that there are many of them in Mexico. so there will be less demand on those renewable power solar and wind power plants

That arbitrary amount of 8 million tons is a ‘paper’ calculation based on the projected savings of power that might actually be used by consumers, and not actual savings of CO2 emissions, as I mentioned above.

This ‘supposed’ savings of 8 million tons of CO2 will earn the Company 8 million carbon credits, again a ‘paper’ generated number by the authority who determines these things.

The Australian Company then says it will trade those credits in Europe. They say Europe, because that is the only area where a Carbon Trading scheme is in progress. Those credits were sold originally by the Governments of those European Countries to those Companies actually emitting the CO2, in the main those coal fired power plants. The credits were originally sold at around $US45 each. The price has since spiralled downwards to a point where that original outlay of that $45 per credit sees those credits now worth only $10, and maybe $15 at the absolute best, and in the main, considerably less than that, a fraction of their original cost.

So, any Cap placed by those Governments, a cap specifically designed to decrease each year, will see nothing but reductions in power produced, if those Companies are to adhere to this scheme. If they want to keep producing the power that demand will quite obviously require, then those Companies will need to purchase more of those credits to enable them to keep demand up to those who require it. They will purchase them at the premium price, even if that is only a fraction of the original, and once purchased they will be virtually worthless, because it is only a paper credit.

So, this Australian Company will sell their 8 million credits, and let’s say they actually get the top current price of $15, that will net this Company a cool $120 Million. They will have the overheads from the original purchase, the costs of freight at both ends and the shipping, but if those bulbs are manufactured for a few cents each, there will still be a very tidy profit being made here.

So what has happened to overall CO2 emissions.

In China, they probably rose marginally to cover the huge order. The Carbon footprint will have increased for the extra workers who need to be hired, their travel to and from work, as well as the packaging and the freight and the shipping.

In Mexico, they probably fell, but by a really minimal amount as I showed above. There is also the added Carbon footprint of freight and packaging in that Country, and the extra workers needed at all the hardware stores to cover the increase in visitors all ‘clamouring’ for the free light globes.

In Europe, those emissions rose from the original cap, because now the plants have purchased more credits, they can emit more.

In Australia, nothing. No change, because at no time did anything actually happen here other than the transfer of paperwork. Arguably, Australia can in all respect be accountable for the huge extra carbon footprint of all this, the freight, the shipping, the planes to and from China, Mexico, and Europe to supervise the smooth and efficient running of this whole thing.

The CO2 emissions savings have been virtually cancelled out when seen over the whole of this scheme.

Those Mexicans got 30 million free light globes.

In Australia, the backers, the financiers and the shareholders all made a tidy profit, thank you very much.

Carbon Cap and Trade.

That’s how it works.

It’s really not very much at all to do with altruism or even the environment.

It’s just about the money.

Just like I’ve been saying now for 16 months.

(All math calculations based on figures from four sources, the U.S. Government Energy Information Administration (EIA), the International Energy Agency (IEA), The UNFCCC, and the UNIPCC)

Tagged: Carbon Cap And Trade, Carbon Credits, Carbon Dioxide (CO2) Emissions, Carbon Trading, Coal Fired Power Generation, Kyoto

Posted in: America (USA), Australia, China, Climate Alarmists, Climate Change, Environment, Environmental activists, Fraud/Waste, Global Warming, Mexico, Propaganda