The Fake Factory That Pumped Out Real Money • Hacker News Board

Re: The Fake Factory That Pumped Out Real Money

#21

Post by blaisio » Sun, Jul 17, 2016, 5:14 PM UTC

jacquesm wrote: post #17

cgriswald wrote: post #16

Earlier quoted context omitted.

That's a bit like saying a ripped-off investor should have bought stock, not mutual funds. These companies needed the RINs, not the fuel. If they had bought the fuel with the RINs they could have been assured the RINs were legitimate, sure. But that has all kinds of associated costs (quality control, finding buyers, the cost of the fuel itself, etc.). A legitimate biodiesel producer is probably better positioned to d…

And that's precisely the problem. As soon as you start selling something totally abstract in lieu of something that was presumably produced all control mechanisms fail. Which is why I'm not a fan of these constructs. Even a legitimate biofuel producer will see better margins on the RINs than on the fuel...

I think you just don't understand how a cap and trade system works. You should try doing a google search to read up on it. It's confusing at first, but there's nothing inherently uncontrollable about it. The only reason these scams are allowed to happen is the EPA doesn't have enough manpower to constantly watch over every facility to make sure fuel is actually being produced.

Re: The Fake Factory That Pumped Out Real Money

#22

Post by RockyMcNuts » Sun, Jul 17, 2016, 5:14 PM UTC

Alex3917 wrote: post #8

Pxtl wrote: post #3

Earlier quoted context omitted.

Yes, that's why most economists I've read seem to agree that carbon tax is better than co2 credit cap-and-trade systems - simpler and harder to game, flawed only because it includes the word "tax" which is unpalatable to the public.

A tax is actually vastly more complicated and easier to game. Remember, the goal is to cap emissions, not to raise money. When you start with a cap and work backwards towards the clearing price, you are guaranteed to be meet that cap. But when you start by setting a price, there is zero guarantee that you're going to meet your emissions target. Also, the point of cap and trade is that it lets societies meet their emi…

sorry, what? A tax is simple, like a sales tax or VAT, and there is a strong incentive to collect it at a centralized source that is pretty easy to monitor.

How is that complex vs. creating a new commodity in the form of carbon credits, and checking that the emission is backed up by credits?

At best, cap-and-trade is equivalent to a carbon tax plus some corporate welfare to return the tax to the polluters.

In the most likely scenario, it's an opportunity for rent-seeking politicians to dole out the credits to those who either currently pollute most or just have their ear, for worst current polluters to cash in on opportunity to reduce pollution, for financiers to make big bucks trading credits.

At worst, it's a fraud where people will buy credits from people who don't reduce pollution or would have done so anyway.

Re: The Fake Factory That Pumped Out Real Money

#23

Post by rayiner » Sun, Jul 17, 2016, 5:15 PM UTC

fsargent wrote: post #18

Alex3917 wrote: post #8

Earlier quoted context omitted.

A tax is actually vastly more complicated and easier to game. Remember, the goal is to cap emissions, not to raise money. When you start with a cap and work backwards towards the clearing price, you are guaranteed to be meet that cap. But when you start by setting a price, there is zero guarantee that you're going to meet your emissions target. Also, the point of cap and trade is that it lets societies meet their emi…

Cap and Trade and a Carbon Tax are equivalent in outcome. Cap and trade would impose fees on everyone regardless of how much it costs them to lower emissions also. The problem with Cap and Trade is that it targets the large scale emitters rather than the item desired to be limited. Imagine that you had five major producers putting out 30% of airborne carbon, and 50,000 minor producers putting out 70%. The cost of adm…

As California's attempts to tax mileage of hybrid and electric vehicles proves, if you create an additional source of revenue for the government, tax levels will bear no relation to the harm they're designed to compensate for. It becomes just another way for the government to raise taxes without admitting to doing so.

Re: The Fake Factory That Pumped Out Real Money

#24

Post by ryandrake » Sun, Jul 17, 2016, 5:16 PM UTC

seibelj wrote: post #13

Bromskloss wrote: post #4

I'd much appreciate a description of the core thing here, without the narrative.

EPA allows biodiesel refiners to make up their own serial numbers. They sell the numbers in excel spreadsheets to oil companies. No one ever verifies that the numbers match real barrels of biodiesel. Criminals moved in

THANK YOU. >3000 words to 36. These long form articles are not for everyone, a TL;DR summary is always welcome.

Re: The Fake Factory That Pumped Out Real Money

#25

Post by blaisio » Sun, Jul 17, 2016, 5:16 PM UTC

seibelj wrote: post #13

Bromskloss wrote: post #4

I'd much appreciate a description of the core thing here, without the narrative.

EPA allows biodiesel refiners to make up their own serial numbers. They sell the numbers in excel spreadsheets to oil companies. No one ever verifies that the numbers match real barrels of biodiesel. Criminals moved in

People do verify it (that's how this guy was caught). They just can't watch every facility all the time; there are too many.

Re: The Fake Factory That Pumped Out Real Money

#26

Post by rayiner » Sun, Jul 17, 2016, 5:21 PM UTC

RockyMcNuts wrote: post #22

Alex3917 wrote: post #8

Earlier quoted context omitted.

A tax is actually vastly more complicated and easier to game. Remember, the goal is to cap emissions, not to raise money. When you start with a cap and work backwards towards the clearing price, you are guaranteed to be meet that cap. But when you start by setting a price, there is zero guarantee that you're going to meet your emissions target. Also, the point of cap and trade is that it lets societies meet their emi…

sorry, what? A tax is simple, like a sales tax or VAT, and there is a strong incentive to collect it at a centralized source that is pretty easy to monitor. How is that complex vs. creating a new commodity in the form of carbon credits, and checking that the emission is backed up by credits? At best, cap-and-trade is equivalent to a carbon tax plus some corporate welfare to return the tax to the polluters. In the mos…

> In the most likely scenario, it's an opportunity for rent-seeking politicians to dole out the credits

That's not how the credits work.

Re: The Fake Factory That Pumped Out Real Money

#27

Post by cgriswald » Sun, Jul 17, 2016, 5:21 PM UTC

jacquesm wrote: post #17

cgriswald wrote: post #16

Earlier quoted context omitted.

That's a bit like saying a ripped-off investor should have bought stock, not mutual funds. These companies needed the RINs, not the fuel. If they had bought the fuel with the RINs they could have been assured the RINs were legitimate, sure. But that has all kinds of associated costs (quality control, finding buyers, the cost of the fuel itself, etc.). A legitimate biodiesel producer is probably better positioned to d…

And that's precisely the problem. As soon as you start selling something totally abstract in lieu of something that was presumably produced all control mechanisms fail. Which is why I'm not a fan of these constructs. Even a legitimate biofuel producer will see better margins on the RINs than on the fuel...

I'm not defending the system. It is quite evidently flawed. I'm objecting to the implication that the oil companies are complicit rather than victims of fraud.

>Even a legitimate biofuel producer will see better margins on the RINs than on the fuel...

It certainly seems to create an incentive to cut costs at the expense of quality. I don't understand why Green Diesel didn't just continue to produce poor quality fuel and thereby sell legitimate RINs.

Re: The Fake Factory That Pumped Out Real Money

#28

Post by skybrian » Sun, Jul 17, 2016, 5:22 PM UTC

jacquesm wrote: post #17

cgriswald wrote: post #16

Earlier quoted context omitted.

That's a bit like saying a ripped-off investor should have bought stock, not mutual funds. These companies needed the RINs, not the fuel. If they had bought the fuel with the RINs they could have been assured the RINs were legitimate, sure. But that has all kinds of associated costs (quality control, finding buyers, the cost of the fuel itself, etc.). A legitimate biodiesel producer is probably better positioned to d…

And that's precisely the problem. As soon as you start selling something totally abstract in lieu of something that was presumably produced all control mechanisms fail. Which is why I'm not a fan of these constructs. Even a legitimate biofuel producer will see better margins on the RINs than on the fuel...

This is like saying banks should ship gold bars to each other, or maybe we should give up on money and use barter. (Money is an abstraction, after all.)

Abstraction is just how finance works. Yes, there is a risk of fraud, particularly in newer abstractions, but that's why we need auditing and enforcement.

Re: The Fake Factory That Pumped Out Real Money

#29

Post by paulsutter » Sun, Jul 17, 2016, 5:26 PM UTC

jacquesm wrote: post #2

It's a typical case of creating a wrong metric and then steering by it. I really don't like these 'credits' systems, the same goes for CO2 credits and all the other systems out there like this. They're a magnet for fraud and rarely if ever serve to actually remedy the issue they're aimed at. It's just a way to move money around, not to solve problems. The interesting bit here is that is actually quite hard to figure…

Whether actual fuel is exchanged - or numbers - audits are the only way to catch a cheater. A fraudulent biofuels producer could resell ordinary diesel with just a bit more effort than selling fake credits. A site visit to verify the production of actual biofuels is the method to detect either scheme, so the resolution would be no different.

> The interesting bit here is that is actually quite hard to figure out why what they did was illegal

This was outright fraud (creating and registering identifiers for fuel that never existed).

Re: The Fake Factory That Pumped Out Real Money

#30

Post by tajen » Sun, Jul 17, 2016, 5:32 PM UTC

Pxtl wrote: post #3

jacquesm wrote: post #2

It's a typical case of creating a wrong metric and then steering by it. I really don't like these 'credits' systems, the same goes for CO2 credits and all the other systems out there like this. They're a magnet for fraud and rarely if ever serve to actually remedy the issue they're aimed at. It's just a way to move money around, not to solve problems. The interesting bit here is that is actually quite hard to figure…

Yes, that's why most economists I've read seem to agree that carbon tax is better than co2 credit cap-and-trade systems - simpler and harder to game, flawed only because it includes the word "tax" which is unpalatable to the public.

> "tax" which is unpalatable to the public.

They're right to be concerned: A tax goes to the government and the price is set wrong. What's the correct amount? $5 per barrel[1]? $25? $250? $3000? $3000 would be insane, right? The People would rise up against those who decide that price. Plus, if it's a government tax, it goes to the pocket of the government. If it's traded on the stock exchange, at least it's not the government who's to blame if the pricing is too high, and it's not the government who gets the money - it's redistribution at its most noble name[2].

There are two axes: How high it should be to reduce demand of petrol to a sustainable level, and how high to account for the cost of the global warming. CO2 emissions were stable in 1990, meaning they were consumed by plants which would emit the equivalent O2. All those policies do is attempt to come back to the levels of 1990. So we just have to let companies purchase their emission rights and see where the price goes. If we don't succeed, it will cost trillions, so again we need to factor those trillions into the cost of barrels. If we just get the cost high enough, we'll either use alternative sources or avoid spending[3]. So, yes, basically, the right cost of a barrel of petrol is the cost of switching to an alternate source, plus the cost of the damage of the global warming: It could very well be $3000.

And fact is, a government isn't going to raise a $3000 tax per barrel. So, when replacing a stock-exchange-traded price with a tax, I wonder why "most economists we read seem to agree".

[1] Meaning: 5% of the price of a publicly-traded barrel of petrol that have the same effect on global warming.

[2] The only thing against trading emissions on the stock exchange is that a lot of people don't trust stock trading anymore. They point out speculation, HFT, subprimes. Sometimes it's a misunderstanding of the usefulness of capitalism, sometimes the public is correct (The financial industry reaps the benefits instead of the end user does). Whether or not it's right, it's extremely sad for the Earth if we replace a $3000 emission cost with a $5 carbon tax.

[3] "Avoid spending" is not a light term here. It basically means a group is going to be really, really poor because we can't build enough goods for them given the CO2 limit.