Lehman misses out on carbon credit scam

By Christopher Booker
Last Updated: 12:01am BST 21/09/2008

What is the connection between the bankrupt Lehman Brothers and the likelihood that in four years' time our electricity bills will jump another 25 per cent (on top of the rises likely from soaring coal and gas prices)?
The answer is that, before its collapse, Lehman was pitching to become the leader in the vast trade created by the new worldwide regulatory system to "fight climate change" by curbing emissions of carbon dioxide.
The biggest money-spinners will be the schemes whereby industry will pay for permits to emit CO2 at so much a ton, either directly to governments or by buying them on an international market.

This market, soon to be worth trillions of pounds, was where Lehman hoped to be "the prime brokerage for emissions permits", as it set out in two hefty reports on "The Business of Climate Change".
Advised by some of the world's leading global warming activists, such as Dr James Hansen and Al Gore (a close friend of the firm's erstwhile managing director Theodore Roosevelt IV), Lehman bought their message wholesale. GIM, the company set up by Gore to sell "carbon offsets" in return for planting trees, was a prized Lehman client.
The particular market that Lehman hoped to dominate is centred on the buying and selling of carbon permits, through the EU's Emissions Trading Scheme (ETS) set up in 2005, the UN's Clean Development Mechanism (CDM) and the "cap and trade" system proposed for the US by both McCain and Obama.
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This may still seem abstract but it will affect all our lives, because ultimately we will all be paying for it, through the colossal costs it will impose on industry, not least electricity.
The EU scheme already adds more than a billion pounds a year to our electricity bills. In four years' time it will become much more obvious when, under phase two of the ETS, permits will be auctioned, at a projected initial figure of £35 per ton of CO2.
On the basis of current wholesale prices, the annual cost of electricity used in the UK alone is around £32 billion. Adding £35 for every ton of CO2 emitted in producing it will mean that our electricity supply companies will have to pay £8 billion for their permits, adding 25 per cent to the total cost. Under EU rules, this must be passed on to all of us in our bills.
The idea is that, to reduce carbon emissions by an eventual 60 per cent, the number of permits auctioned will reduce year by year, leaving an ever larger shortfall which firms will have to account for either by reducing emissions or by buying additional permits - not least from the developing world under the UN's CDM.
Everything about this grandiose scheme betokens the economics of the madhouse.
The new costs it will impose are so colossal that whole industries, including aluminium, steel and Germany's chemical companies, threaten to move their operations outside the EU unless they are given free allocations. It has not even been agreed who - whether national governments or the EU itself - will run the auctions or keep the hundreds of billions of euros a year the scheme will raise.
China, by virtue of having built giant dams to produce electricity, will be a net "carbon creditor", able to sell permits to the EU worth billions more, despite continuing to build a new coal-fired power station every four days.
So will Russia, thanks to it having closed down so much of its polluting industry after the fall of Communism. There is not the slightest indication that the scheme itself will result in any lowering of global CO2 emissions.
What is certain is that it will pile astronomic costs onto everyone in the EU, inevitably impacting most severely on poorer householders that will face bills they cannot afford. The only other certainty - perhaps a consolation - is that those sharing in this bonanza will not include Lehman Brothers, now excluded from cashing in on what threatens to become the maddest scam the world has ever seen.