I am always feel slightly worried for someone who puts his life’s savings into an investment because politicians said it is a good idea to do so. It is like putting all your money on black at the casino because a politician told you it was the right thing to do.
Trust Me …
After several years working for or around politicians I always thought this was a good summary of what you should do if a government tells you to put your money somewhere:
“ Three lines you should never believe:
- I’ll respect you in the morning
- The cheque is in the post
- I am from the government, I am here to help.”
Lessons for the Carbon Market
Now, I am sure many people have fallen for these lines, I certainly have, but I heard with interest that the European Commission has just decided to inflict a lot of pain on people who believed in the EU carbon market. The price of carbon under the ETS carbon market has hit rock bottom prices. And, any new release of the new auction credits, due in the next few months, would send the price even lower. People holding carbon allowances would be sitting on nearly worthless assets. For some companies this is likely to hurt. Worthless stock will need be credited as being worthless in their quartelrly reports. Uncomfortable questions will be raised – did you really buy this on the advice of the European Commission?
You can see a good summary from Reuters here.
If you can’t buck the market , just change the rules
In a well co-rodinated leak on Friday 15 June the European Commission leaked to the press that it was going to suspend the next tranche of auctions of carbon. They are doing because this to increase the price of carbon in the EU market. It clearly has not worried anyone that the disruption to the market of the regulator unlialterally will damage the integrity of the market that prices will stay and remain low. Anyone with an ounce of sense will keep well away from such an unstable or arguably rigged market place.
You Could Not Make This Up
And, they are going to push it through under a semi secret legislative procedure, cosmetology, that gives the public very little means to know what is going on.
The only problem seems to be that the law does not allow them to do this. That would need the Commission to propose a new piece of legislation that would need the agreement from the European Parliament and the Member States. That usually takes a lot of time. And, the political process can lead to difficutl questions to be asked, and often they impertanrly don’t agree with the Commission.
But, under this procedure the Commission can fast track the whole exercise. The only difficulty is that the legilsation does not seem to allow them to do that. Not that politics or financial interest to skip over the safegaurds of the rule of law. it is just that by the time the issue ever comes to court the deed will have been done.