“CO2, The New Cash Crop” by Reece Gates
CO2 the New Ca$h Crop
Guest-written by Reece Gates
This industry could be gargantuan; organizations, lobbyists, and energy companies are already fighting over how this new cash crop legislation should be framed. I must say it is a novel Idea, this has to be one of the best Ideas I have heard of since the futures market was set up, but it is just an idea. How it works has holes. Last November a Green exchange was set up in Chicago, it is called the Chicago Climate Futures Exchange. They set up for a test run and put together a pilot program where a select few farmers & polluting industries such as automakers could trade Carbon. The chart to the right is a 3 year chart for CO2, Europe and other countries have already started doing this; I believe that is why there is a 3 year history. I know a lot of you are thinking, how can you trade Carbon? You think Credit Default Swaps are exotic, here in Chicago we literally trade the weather; almost 10 years ago the Chicago Mercantile Exchange began offering weather futures and options as a trading instrument, and we also have housing futures.
If you do not really understand what futures are just read my comprehensive blog on “What are Futures Contracts?” CO2 is not going to be farmed or harvested, it is the exact opposite, in 2007, a Wilcox, Nebraska farmer started cultivating carbon. By not tilling his 800 acres, Mr. Woollen, by some estimates, keeps 470 tons of carbon per year in the ground and out of the atmosphere. Because of that, Woollen gets carbon credits he can sell on the Chicago Climate Exchange. Woollen gets about $3,000 a year from the climate exchange’s carbon-trading pilot program.
Now who is going to buy these Carbon credits? Major polluting industries will have to buy them if & when mandates require them to cut their emissions. If Ford Motor Company has to cut their emissions by 10,000 tons of CO2 in 2010 but they come up short and only cut it by 5000 tons, they will be fined by having to purchase carbon credits from those who are saving CO2; it is basically a CO2 tax disguised in a free market. From my perspective, the cash rich corporations that pollute do not have to ever cut their emissions; all they have to do is purchase carbon credits and keep polluting, eventually this will drive the price of Carbon Credits up so that smaller companies will not be able to afford to offset their emissions and will either be driven out of business or shut down by the government. In essence, polluters will have to pay those who are making a smaller carbon foot print for themselves for polluting their environment. How would you like to be paid to breath in asbestos? Nonetheless, it is a great idea.
Thanks for reading.