Sunday, July 18, 2010

Cap and Trade Summary & Review

I work with U.S. people in my day-to-day job and one thing common that I found out about them is they like to come out solution that appears to be a real solution but in fact is not. In short, if you just listen to what they talk without further analysis, what solution that they have proposed will seems to be really making sense.

However, with further thinking and detailed technical analysis of their solution, it will usually ended up that their solution is just another hoax. It all started with the burst and follow by sub-prime mortgage crisis. Perhaps now Cap and Trade could be one of them too - a possible brand new 3 trillion dollar market by 2050?

See the video clip below  from Annie Leonard who is also the author of "The Story of Stuff":

If you have difficulty to understand the video, you can also read my following summary and discussion on this "Cap and Trade" system. I hope that will be easier to understand.

What is the Cap? 

Global warming is due the emission of Carbon Dioxide (i.e. CO2) into our atmosphere.  In order to prevent and slow down the global warming crisis in the future, the cap is invented to tackle this problem. The intention is to limit how many CO2 that you can release to our atmosphere. The goal is to reduced the current CO2 emission by 80% by year 2050. So the dotted-line in the graph below is the "Cap".

Carbon permits or CO2 emission allowances was then invented in order to accomplish the goal to stay below the cap. It is like a license or permission to pollute the air. Government issues this carbon permits to companies who would like to pollute the air. As you can see from the graph, the number of permits will be reduced every year in order to meet the goal target in 2050.

[Discussion] I think this is definitely a right thing to do and it is always good to set goal that we all know where we're heading too. Good strategy in fact to so save our world! Don't you think so?

Devil One: Cap and Giveaway

The next question how are the Carbon permits are distributed? The government in fact is giving these permits for free based on the history of a company how much they polluted the air in the past. This is  called "Cap and Giveaway". What was suggested by Annie is instead of giving permits away to them, we could sell to them and use the money for better purpose (e.g. build a clean energy economy).

[Discussion]: I do not completely agree with it. Assuming if we sell the permits to those companies. Who will be going to bare the cost of their products? Consumers? So it ends up we pay more because of they're polluting the air? So indirectly, we're actually paying the government to allow those polluter to pollute the air? I don't think selling the permits will work too.

Devil Two: Offsetting

I think the most evil about this system is probably because we make this thing "trade-able". For companies which pollute less than the allowable permits, they can sell the remaining permits (i.e. offset permits) to those companies which want to pollute more than the allowable permits. This seems pretty reasonable as long as we don't go beyond the Gap as whole.

This is the part the system gets complicated and confused. Theoretically, it should work but that is another story in reality due to the complexity of measuring the amount of pollution. How to tell how much a company is polluting? If we can't measure it, how much permits we should give? What about the transaction costs involved in buying and selling permits? Consumer bares them? How about those company pollute less in U.S. and transfer their pollution to Asia since Asia doesn't participate in this Cap and Trade?

Devil Three: Distraction

The "Devi Three - Distraction" as mentioned by Annie is not really key message as compared to Devil 1 & 2 above in my opinion. What she was really want to say is the Cap & Trade protects business as usual and have no intention of saving our world. In short, it is a scam. :)

[Discussion]: As you can see, the really evil about this Cap & Trade to made this rule trade-able, something similar like stock market. It becomes so complex that no one is really know what is going on and forget about the original intention. U.S. once again create something out of nothing (i.e. predicted a brand new 3 trillion dollar market by 2050).

So, can we conclude Cap & Trade is a scam? I think no one can prove it right and of course no one can prove it wrong too. Similar to Sub-prime Mortgage, is that a scam? What do you think?

P/S: As usual (which I find it difficult to understand) for more details about Cap & Trade, you can visit the Wikipedia: Emissions Trading.

Monday, July 05, 2010

Different Experiences for My Trip in China

This is not a financial article but a pretty standard in my blog which I talk about my travel experiences. This is my second trip to China and my first trip to China is probably 5 years ago. Some of these experiences maybe sensitive to some of you but this is only for sharing purpose. You may experience a different thing if you have visited China. Let's see what is my take away from this trip...

Wasting Food to Show Off

I think this is typical a Chinese culture especially when someone is paying for the food. During the trip, I really saw a lot of this kind cases. They order a lot of food and purposely not to eat them for the purpose of showing off (for the one who pay the bill) or giving respect (i.e. give face in Chinese) to the one who pay the bill. For example, 5 people order 15 dishes and they consume less than 10% of the food. I'm surprised with this and they don't take away to food after that. I think this defeats the purpose of the culture and simply misused it. Do you agree?

Cheap, Cheap, Cheap ...

Shanghai and probably Beijing (I guess only) is the most expensive places you can find in China. If you know how to find the loophole, you can find cheap stuff in Shanghai and Beijing too. Food is large portion and cheap. What I really enjoy is eating the seafood in Dalian and Dandong. It is really so cheap to eat a seafood like fresh abalone. You can't even find fresh abalone in Malaysia. Other stuff is also very cheap but that is only applicable to local stuff (made in China). Of course if you buy imported stuff, it will be more expensive than in Malaysia. Converting to RM is divided by 2 and to Europe currency is divided by 10!!! (maybe 8 or 9 now). So if you're business man, you will know what to do...

Eating Dog Meat is Legal

Yes, eating dog's meat is legal in China and I see a lot of restaurant selling that. However eating bird's meat is illegal in China. I'm not sure how true this is and I heard from my driver. Perhaps China is lacking of birds and too many dogs? True?

Wearing Helmet is Not Required

At least in Malaysia, wearing helmet is required for those motorbike driver. That is for safety purpose. In China and from what I see, the way they drive the motorbike is a lot more dangerous than in Malaysia and why don't they need to wear helmet? Is that because their skills are really good? How about the accident rate?

Order Food Style is Different

In Malaysia or other countries that I have visited, the waiter will usually give you sometime to think about what you want to order after giving you the food menu. In most of the restaurants that I had visited in China, the waiter will just stand there and wait for you to order after they give you the menu. I usually tell them that I will call them when I'm ready to order. Is that their culture or because they want to be fast?

Security Check at Metro?

Weird thing is, security check is at all metro station entrance. It is similar to the security check that you go through the airport. They will scan through all your luggage and hand bag as well.  I guess the reason they're doing that is to prevent people from bombing the train? Is that really preventable? I've no idea and I just feel that really troublesome to go through it every time...

No Facebook, No Youtube, No Blogger!!!

No wonder my blog has no China visitor because it has been blocked. I can't blog too in China :( and Facebook and Youtube are blocked too. The only way to bypass this in China is go through "Paid VPN" because most "Free VPN" has been blocked too. Perhaps China Government treats all their citizen like kids and not allow them to watch pornography online. The question is, when the kids will grow up? Is that a good thing to do?

 P/S: Now if you've visited China before, do you experience the same things I do?

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