@ alfred: First off, the price of carbon will definitely go up, because it is zero right now. Then the government will set a low price because that is what industry, the Republicans, and coal state Democrats will allow. Of course, the price of carbon will go up. Go long, alfred, go long – you don’t have to leave all the profits to Goldman Sachs.

Second, about me baiting you: Originally, you said you didn’t want the market to set the price because you worry about speculation, and I said fine, what price should the government set? Then, you wrote “having the government set carbon price is an irrational choice”, which I found bizarre because government sets the price of penalties all the time for regulations (like parking tickets). So, if neither the market nor the government sets the price, I had to ask whether you wanted anyone to set a price at all. I don’t think that’s baiting – I wanted you to make your position clear on whether to regulate or not regulate, and if to regulate, how.

Finally, I think you were a little confused about cap-and-trade. You wrote: “Perhaps a model is the producers are the coal miners and the manufacturers are the power companies. Except carbon is a liability, not an asset. People are pricing the absence of carbon, which is squirrelly. Who wants carbon from a power plant?” alfred, nobody is trading carbon or taking delivery of carbon. They are trading allowances – the right to emit – and yep, those are assets.

We can pick it up again this AM.

If memory serves me correctly, there’s more to it than that. From the Taibbi article, the game is being rigged to guarantee that the price will only go up. A guaranteed return.

Companies will be able to buy/trade future “vintage year” permits. What strikes me as odd is that you will be able to play compliance games for up to 15% of emission holdings where you can be cleared for current-year compliance if you’re holding a permit good for up to 5 years into the future.

So that makes me think they’re going to be auctioning permits 5 years out (i.e., 2012-2016/17) starting in 2011.

I’m skeptical that the equity markets and the economy generally will be healthy enough to be able to figure out the system and valuation by then.

I don’t want speculators setting carbon price.

You keep trying to put words in my mouth that I’m really interested in some other kind of issue and I’m using speculation as a cover. Wrong.

If you’re trying to bait some others, good luck. Isn’t going to work with me.

So, if we can just clarify, you just don’t want carbon emissions regulation, period, correct? If you don’t want government or anyone setting a price for the penalty, there is no penalty, and no regulation, or is there some penalty-free regulatory scheme that I am missing?

Plus, the timing is awful. This market is fucked right now in terms of price discovery .