Carbon traders have refuted claims that the European emissions trading market is "the next sub- prime crisis", after a report by Friends of the Earth called for the system to be abolished. The environmental charity said not only does the current system of trading permits fail to tackle climate change, it is also financially dangerous. Currently only Europe has an emissions trading scheme, where companies can buy and sell permits giving them the right to pollute the atmosphere with carbon dioxide.

Sarah-Jane Clifton, author of the report, said the growth of a secondary market in carbon trading involving "financial speculators and complex financial products, carries a risk that carbon trading will develop into a speculative commodity bubble".

This could "provoke a global financial failure similar in scale and nature to that brought about by the recent sub-prime mortgage crisis", she said. But Patrick Birley, chief executive of the European Climate Exchange, which runs the trading forum based in London, said the comparison between carbon markets and sub-prime style finance was "misguided", claiming the system is highly regulated and transparent. - Telegraph

Dominant Social Theme: Why attack a useful market?

Free-Market Analysis: We have a bit of problem with carbon trading to begin with. We just can't bring ourselves to believe in global warming - which carbon trading is supposed to address. That this concern now includes "climate change" has not appreciably elevated our enthusiasm. Having confessed we see no reason, therefore, for a carbon market or even for carbon traders (whatever they are) we believe we have provided you with the sort of conflict-of-interest alert that even the Washington Post's omnibudsman would find appropriate if not laudatory.

And having made our confession, we would now like to point out that Sarah-Jane Clifton is absolutely right, though probably not for the reasons that she thinks. Clifton strikes us as one of those really concerned environmentalists, one who is peeved not at the idea of yet another economic "crisis" but at the uncanny ability of the market to manufacture profit-making products. Clifton, in fact, as other parts of this article make clear, doesn't much like financial types anyway, and she doesn't believe that carbon trading is the way to address the catastrophe of global warming (or is it climate change).

Clifton is right because if central banks succeed in re-inflating the Western bubble economy, carbon credits will inflate too. It is all a function of printing too much money. If Clifton had made the case that central banking would certainly ruin the carbon market as it generally ruins every other market it touches (over time anyway) we would be behind her one hundred percent. But, again, we don't think this is the point that Clifton is making. She knows, somehow, that the sub-prime crisis is a bad thing, and has decided to link "sub prime" to the "carbon market" in the hopes that others will also think, going forward anyway, that the carbon market is bad because it is "sub prime."

The carbon trading market is "bad" for a number or reasons, in our humble opinion, though Clifton would doubtless not agree with our analysis. The carbon trading market is bad because it solves no problem since there is no problem to begin with. And it is bad because it will inflate along with other asset bubbles if central bankers are indeed able to fully re-stimulate. This means we will be subject to a spate of articles at some point pointing out that if we had just bought carbon credits when they were "cheap" we could retire by now. Ah, the magic of the market!

Conclusion: We have floated the idea before, and we still believe it has merit so we will refloat it here: There is one reason to create a carbon market, and only one. It is to take the place of a gradually reducing currency market that will shrink as the monetary elite does its best to combine currencies and move toward one global currency. Those who align themselves with the monetary elite need very large markets in which to play. If the world can be convinced of the need for securitized carbon sinks, the carbon market could be a large one indeed.

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