Sign up for our daily newsletter

Business

Carbon dioxide a gov't-made commodity

Becky Yeh - California correspondent   (OneNewsNow.com) Monday, November 26, 2012

According to one analyst, a cap-and-trade market creates a government-made commodity out of a naturally occurring gas to regulate and tax businesses.

The California Air Resources Board has announced that a ton of carbon sold for $10.09 at the state's first private cap-and-trade auction of "pollution allowances"-- a few cents higher than the $10 minimum set by the board. Officials call the auction, which kicked off the state's cap-and-trade market, a success. In total, roughly $290 million was spent on carbon credits.

Borelli, Tom (FreedomWorks)Tom Borelli, a senior fellow at Freedom Works, thinks the auction was pointless.

"Carbon dioxide is a natural-occurring gas; there's nothing really special about it -- it's ubiquitous," he points out. "And now because of government action, they are trying to make this have a value.

"But the value is only due to the state of California's decree. There's no inherent value in carbon dioxide. It's not like a diamond; it's not like gold; it's not like copper -- even pork bellies or coffee."

Borelli is uncertain whether the price of a ton of carbon will remain $10, as it is possible that California's entire cap-and-trade market could eventually fall apart.

"If the whole system falls apart, because again it's due to government action, then the billions of dollars, the hundreds of millions of dollars that are being used to buy these credits -- they could turn out to be worthless," the analyst poses. "So at the end of the day, companies could … really get stuck with this certificate of nothing that's worth … any value, because it's essentially hot air."

During the first auction, companies bid as much as $90 for a ton of carbon. The state's new cap-and-trade system is a provision of a global-warming law passed in 2006 that seeks to cut emission of greenhouse gases.

comments powered by Disqus