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The Fake Factory That Pumped Out Real Money

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Re: The Fake Factory That Pumped Out Real Money

#31

Post by tomjen3 »

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…

If I can save 10 tons of co2 at a cost of 2 dollars and you can save it only at 4 dollars, then if we have to lower the amount by 10 tons with a tax that is evenly distributed the total cost is going to be 3 dollars - 50% more than under a cap and trade system, where I sell you 10 tons worth of co2 credits and implement all the changes.

Since ultimately a carbon limitation is going to mean more expensive products, it is important to limit it as much as possible.

Also I don't see how a cap-and-trade system is going to be more difficult to enforce than a tax, you are still going to have to check if all the companies have paid their taxes.

Re: The Fake Factory That Pumped Out Real Money

#32

Post by jacquesm »

blaisio wrote: post #21
jacquesm wrote: post #17

Earlier quoted context omitted.

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.

I think I understand it just fine, thank you.

> 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.

So, if you don't have that manpower don't set up a scheme like that.

Trust but verify, remember?

Re: The Fake Factory That Pumped Out Real Money

#33

Post by jacquesm »

skybrian wrote: post #28
jacquesm wrote: post #17

Earlier quoted context omitted.

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.

And without sufficient auditing and enforcement you'll get scams and your goals will not be achieved. You're essentially betting the farm on the honesty of corporations controlled by people who now have a direct incentive to cheat. That's putting an awful lot of faith in humanity right where it has the biggest chance of failing (at the CEO level).

Note how in the article the people working there were saying they were 'expecting an audit any day now', but as long as their paycheck depended on not being audited they were all fine with it.

It's rather strange how the CEO is the only person indicted.

Re: The Fake Factory That Pumped Out Real Money

#34

Post by tomjen3 »

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…

You still have to check if everybody has paid their emission tax.

Also a tax has to be high enough to offset the average cost of lowering Co2 emissions (since you force everybody to lower their emissions), whereas in a cap-and-trade system the price will the the lowest cost to lower the emissions, since anybody who would pay a higher price will be better of buying the emission permissions and anybody who can save co2 cheaper will be better of selling them.

Thus a cap-and-trade system is always going to be more efficient.

Re: The Fake Factory That Pumped Out Real Money

#35

Post by ac29 »

rayiner wrote: post #12
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…

Cap and trade systems have the huge advantage that no revenue goes to the government. That eliminates the incentive to set tax levels for revenue generation purposes instead of at levels linked to the real purpose.

>Cap and trade systems have the huge advantage that no revenue goes to the government.

The revenue certainly goes to the government in California, unless I am completely misunderstading the program: http://www.lao.ca.gov/reports/2014/budget/cap-and-trade/auct...

Re: The Fake Factory That Pumped Out Real Money

#36

Post by jacquesm »

pmorici wrote: post #19
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…

"The interesting bit here is that is actually quite hard to figure out why what they did was illegal" I wouldn't go that far. Each RIN needs to correspond to some physical bio-fuel. They were generating RINS but not manufacturing the corresponding fuel. Seems like straight forward fraud. Now had they been actually making the fuel but then dumping it in the trash and just selling the RIN I agree it would be harder to…

You can't exactly affix a number to a specific gallon of bio-fuel. That's where the whole scheme goes off the rails, to create unique ids that only exist in spreadsheets with no 1-1 link to some quantity of product.

It's a liquid, not a box of stuff.

Re: The Fake Factory That Pumped Out Real Money

#37

Post by pjc50 »

tomjen3 wrote: post #34
RockyMcNuts wrote: post #22

Earlier quoted context omitted.

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…

You still have to check if everybody has paid their emission tax. Also a tax has to be high enough to offset the average cost of lowering Co2 emissions (since you force everybody to lower their emissions), whereas in a cap-and-trade system the price will the the lowest cost to lower the emissions, since anybody who would pay a higher price will be better of buying the emission permissions and anybody who can save co2…

> You still have to check if everybody has paid their emission tax

Presumably the tax attaches to fossil fuel importers and vendors, rather than trying to tax each individual consumer.

Re: The Fake Factory That Pumped Out Real Money

#38

Post by jacquesm »

cgriswald wrote: post #27
jacquesm wrote: post #17

Earlier quoted context omitted.

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…

Because they'd end up with a bunch of unusable fuel that they would have to get rid of somehow. They chose the environmentally cleaner route ;)

Re: The Fake Factory That Pumped Out Real Money

#39

Post by RockyMcNuts »

rayiner wrote: post #26
RockyMcNuts wrote: post #22

Earlier quoted context omitted.

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.

How the eff does it work? Who gets the credits to start with? Why do you think the companies prefer cap-and-trade? of course it's more complicated to end up monitoring both the pollution and who owns what credits.

the whole point of cap-and-trade is to avoid the word 'tax', and to create a vast rent-seeking system and potential for gaming the system, and make it politically palatable by paying off the people who might object.

http://www.telegraph.co.uk/finance/newsbysector/energy/69126...

http://www.france24.com/en/20160503-france-trial-multi-billi...

Re: The Fake Factory That Pumped Out Real Money

#40

Post by gus_massa »

pmorici wrote: post #19
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…

"The interesting bit here is that is actually quite hard to figure out why what they did was illegal" I wouldn't go that far. Each RIN needs to correspond to some physical bio-fuel. They were generating RINS but not manufacturing the corresponding fuel. Seems like straight forward fraud. Now had they been actually making the fuel but then dumping it in the trash and just selling the RIN I agree it would be harder to…

It's not necessary to dump it, they can burn it to run the rest of the factory, or a bitcoin mining site, or the biggest communal sauna ever, or ...

(I'm not sure that there are not some provisions to close these loopholes. https://xkcd.com/1494/ )

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