TCS Daily


Volatile Gases

By Iain Murray - May 11, 2006 12:00 AM

The European emissions trading scheme (ETS) was launched with great fanfare last year. The idea was to require certain energy-intensive industries to have a permit for each ton of greenhouse gases they emitted. Each industry would be allocated a certain number of permits. If they needed more, they would have to buy them; if they were able to cut emissions below their allocation, they would be able to sell them. The idea seemed wonderful in theory -- a "market-based" way to reduce emissions. In practice, the market has been a roller-coaster, reaching record highs of over €30 per ton before collapsing to just €11 last week.

What caused the precipitous collapse in price was the early reporting by France, the Czech Republic, Estonia and Holland that their emissions for 2004 were not as high as their allocations, along with the announcement by Spain that it had exceeded its allocation, but not by as much as thought. Traders reacted immediately on the assumption that other countries would make similar announcements, although this is likely to be premature, and the fear of a market glut drove prices down. To understand what happened we need to think about what the market price of an emissions permit actually represents.

A price is essentially information. At its simplest, the price paid for a permit represents merely the cost of undertaking the activity for which the permit is granted. Permits have been auctioned in the past at least partly to establish the true level of such costs. However, when permits are traded, extra information is added that changes the price from a mere reflection of the cost. Scarcity value is the most obvious example: when the market believes permits will be scarce, their value increases. If there will be enough for everyone who wants one to get one, no scarcity value will be added. Thus a rise or drop in price will reflect the market's greater emerging knowledge about the actual level of scarcity involved.

Prices can rise or drop quicker when speculation is involved and traders are essentially gambling that scarcity will be greater or less than the market as a whole believes. Wide price fluctuations, therefore, inevitably represent a lack of complete information about the nature of the market. Political uncertainty or lack of transparency related to the market merely lessens information available and therefore contributes to market uncertainty (this should be borne in mind when considering demands to keep emissions information secret).

With this in mind, we can look at the history of the European emissions market. When it was first mooted, there were fears of high prices imposing massive extra costs on industry that would be passed on to consumers. Eurocrats rushed to reassure the market this would not be so. For example, in October 2004 Spain's Cristina Narbona took to the airwaves to angrily deride a KPMG projection of prices in the €15-20 range as "false" -- if also asserting that such prices would indeed be cause for panic -- insisting instead that €5-6 was the reasonably anticipated price.

What happened next needs to be understood in the context of the national allocation plans. It is widely agreed that European member states, not wishing to see their national industries suffer, submitted overly generous allocation plans to the European Commission. The exception was the UK, which was serious about its commitment to reducing emissions. However, on seeing that its allocation plan handicapped British industry by essentially requiring them to purchase foreign credits, the UK government took the Commission to court to try to get its allocation plan replaced with a more generous one.

Meanwhile, the market price swiftly reached KPMG's estimate and then surpassed it. Traders were worried about the emissions associated with a forecast (and actual) cold winter and bid up the price. Large companies with large allocations therefore found themselves sitting on a gold mine. At the same time, the cost of the permits drove up energy prices. A study by UBS Investment Bank, for instance, found that most of the energy price increase in Europe last winter was due to the cost of emissions permits. This prompted calls from environmental groups for windfall profit taxes and other measures to remove the "unearned" value of the permits from the hated industries.

This is important. When traders do not have the information to act rationally they have a tendency to act irrationally, on hunches or gut feeling. In a politically charged market such as the carbon permit market, traders will also react to statements by major political players. Environmental groups demanding tighter allocations or auctions, for instance, will cause traders to take this political risk into account, the implied increase in scarcity almost certainly driving the price up.

The recent market dive has also been the result of incomplete information. The countries that have reported surpluses on allocation are not major emitters. The major emitters like Germany and the UK are due to report on May 15. It is possible that they will not have the same surpluses, which may cause the market to rebound slightly. On the other hand, it is also possible that they will report emissions lower than allocation, in which case the market will collapse completely.

What does all this mean? First, even at the current market price it suggests that cutting emissions is more expensive (at least twice) than the scheme designers supposed. Unsurprisingly, this has had an effect on energy prices. Proposals to tighten allocation plans would probably cause the price to rise again, reflecting a much higher economic cost of reducing emissions than envisaged. Proposals to auction rather than grant permits would presumably see a very steep rise in the market price, as industries are forced to pay for things they do for free now. Energy prices would skyrocket.

Meanwhile, it should be remembered that the ETS covers only about 40 percent of all emissions in the EU. Report after report from the European Commission confirms that overall few countries are anywhere near their reduction targets, hence the symbolic importance of the ETS. If other sectors, such as aviation, were to be brought within the ETS then the market would probably react as it did in 2005, bidding the price up in lieu of information about how easily the new sectors could reduce emissions. This would in turn have an effect on the sectors already within the scheme. The market is still feeling its way; expansion to include other sectors would increase uncertainty and result in further volatility at a crucial stage.

This all suggests that speculators who have offloaded permits at the current price are reacting to the high cost of emissions reduction. They are guessing that member states and the Commission will be unwilling to impose further restrictions that would send the price up higher.

This supposition would also be confirmed if the major emitters also report emissions below allocation next week. The price would collapse, because it would prove that member state governments were unwilling to restrict emissions by means of tighter allocations; there would be no scarcity value whatsoever to the permits.

So has anybody won from the ETS? Overall, emissions are not reducing and the high costs of the ETS suggest it will not be used to reduce emissions further unless governments are willing to slow economic growth (which is unlikely). Consumers have seen energy prices rise, then fall, for seemingly no reason. Industries, while at one point benefiting from a bull market, have seen millions wiped off their values by the recent collapse and may see yet more value disappear. Politicians and greens cannot claim vindication as the cost of emissions reduction in the event of (perceived or actual) scarcity has been revealed to be much higher than they thought, while companies are experiencing the volatility of an uncertain market and consumers have paid the price.

It should also be mentioned that volatile markets are particularly prone to manipulation by the unscrupulous. Enron recognized the potential volatility of carbon markets when it lobbied hard for their introduction in the United States. Badly structured markets where transparency is lacking are to the rogue traders like pheromones in the insect world.

One final note: the ETS is most emphatically not an example of market failure. The uncertainties are all a result of government action -- inadequate allocation plans, misunderstanding of how much it would cost to reduce emissions, political risk associated with demagoguing special interests and lack of transparency. The fatal conceit led European governments to think they could design a market to produce the outcome they want. Surprise, surprise! They were wrong.

Iain Murray is a Senior Fellow at the Competitive Enterprise Institute.

Categories:

75 Comments

Enron types
It's not clear why Iain Murray thinks the carbon market has failed. He seems upset that some Enron types lost money when the market turned against them. He cannot believe what the low price seems to say: that reducing carbon emissions is cheap. He neglects to say that other pollution markets work fine, too. Of course, when something he doesn't like occurs, he blames government, in this case European governments.

As on previous posts, I ask what Murray's status as "Senior Fellow at the Competitive Enterprise Institute" means. Is it a real think tank or a PR organization for energy companies? Why am I curious. Yesterday was a post saying the country could bounce back from its present Bushian lows. It's probably not a coincedence that David Brooks in the NYTimes had a Op/Ed saying the same thing this morning. It must be a Republican strategy: "It's OK to vote Republican, they have not damaged the country as badly as it seems." Question: Will we see the "carbon market has failed" line cropping up in other conservative outlets over the next few days? If the "Competitive Enterprise Institute" is a real place, Murry's "opinion" is likely to be his own.

Combine this with several EU countries backing away from Kyoto…
And the mess is only beginning. The cost of this program is going to be huge, to consumers, the companies and the countries involved.

SCEPTICISM ON THE RISE AS EUROPE CONSIDERS TO MOVE AWAY FROM KYOTO
http://www.staff.livjm.ac.uk/spsbpeis/CCNet-11-05-06.htm

The assumption which enjoys wide support in scientific circles - mostly in Europe
- and is given great importance at the political level is that climate change is
caused predominantly by the increase of greenhouse gases in the earth's atmosphere
resulting from human activity, above all the burning of fossil fuels.... However,
the global climate is also affected by cycles of solar activity and geophysical
factors, and establishing exactly how great man's influence is compared with
natural changes is not yet possible, nor is it likely to be for a long time...
As it stands now, the [Kyoto] Protocol cannot be an effective instrument for addressing
the question of global climate in the future and an approach will have to be sought
which can seamlessly follow on from it....
While in 1990, when international negotiations began, developing countries accounted
for around 35% of total world emissions, in 2000 the figure was around 40% and
forecasts indicate that by around 2010 it will be 50% and in 2025 as high as 75%.
This represents a serious threat to the goals of this whole initiative. If a global
consensus cannot be achieved on climate change issues through political negotiations,
the isolated endeavours of European countries (the EU) will be incapable of producing
the desired positive effects and could, on the contrary, create a serious imbalance
in economic development...
Further policies to reduce greenhouse gas emissions must take into account all the
economic parameters. If not, those states which have ratified the Kyoto protocol run
the risk of having some of their manufacturing move to developed economies which are
still hesitating to sign the protocol or to developing countries which are not yet
subject to any quota obligations under it. This could result in economic losses and
weakened competitiveness, without producing the desired global reduction in emissions.

Only adequate investment in science and research, monitoring and systematic observation will enable the necessary acceleration in scientific understanding of the real causes of climate change.
--European Economic and Social Committee, 20 April 2006

Shh! Don't let the Euros realize that they've been scammed!
I love it. First, the US signs but doesn't ratify Kyoto. Now, the Euros have ratified and started to implement it.

Meanwhile, we 'unsign' it and just have to sit back and enjoy the artifical boost to our nation's economic competitiveness.

I believe that is called 'bait & switch'.

While we will never be able to compete on the wage scale with China and India for lots of goods, we can in plenty of capital-intensive, energy-intensive spheres where a Kyoto Europe will no longer be able to.

And to think that some in the EU are finally figuring all this out? Amazing.

If you are right…
It will be the first time in history the U.S. has gotten "one over" on anyone in a trade and treaty negotiation. I almost hope you are, it might prove the youngster on the "world power" block is finally growing up.

Good quesitions
It never certain that the information we receive from the news media is correct. So we must use our intellegence to judge the reliability of the information, often throughthat of the source.

But this is nothing new. We have simply been lulled into thinking that the media is correct. I grew up in Detroit and my grandmother was from Eastern Europe. One day shopping she passed a newpaper solicitor on the street who was hawking Pravda, the communist newpaper. She took on of the papers, threw it back at him, and yelled "Pravda? Slavda".

She had apparently pre-judged the "truth" (pravda means truth) of this paper by its source. And so we must do the same.

You have discovered that the political tone of news stories is function of their source. I have too. In fact I thinkt hat this is often more of a story than the content.

On the other hand, I am somewhat surprised at the time of this story, given the source. Instead of dwelling on the virtures of Kyoto, or lack thereof, the author has chosen instead to point out that there is money to be made (through trading) in the mechanisms of Kyoto. And that these meachanisms are not broke, they are simply new and the markets are not understood yet.

Bravo. And yes there is money to be made by supporting Kyoto.

Those opposed to Kyoto are simply going to lose out. They will lose out because they are spending all thier energy trying to tare down an institution that already exists.

There are some holes in your argument
First, Europe and China are investing in education and the development of new technology. There are those (eg, Thomas Freidman) who believe that the future economies will be based on technology and thus dominated by those who have invested in education.

Second, European companies are out-sourcing just as much as the US companies are.

Third, Europe offers a higher quality of life; better living environment, less work hours, earlier retirement, more leasure time, better health care, etc. So, intellegent people will naturally want to work in Europe.

America's financial prowes has been based on natural resource extraction and technology. The former is running out an the later is losing ground. The GNP is primarily internal. The trade international deficit is positive, and growing. And least we forget, keep in mind that Europeans have been engaged in international trade long before the dicovery of America, let alone US international trade.

The political move to not ratify Kyoto by the present US regiem was not some master pan as much as it was pay-off to US energy companies for political support. This is nothing more than a form of government subsidy to a sector that is making record-breaking profits.

Market forces at work
"And the mess is only beginning. The cost of this program is going to be huge, to consumers, the companies and the countries involved."

I think you've missed the thrust of the article, Paul. The reason the emissions trading scheme was adopted was to avert serious costs to business. If they couldn't readily convert to a reduced emissions rate they could purchase carbon credits instead. The plan makes good market sense, does not rely on government intrusions and is designed to promote a "win-win" approach to emissions reduction.

To everyone's surprise, though, emissions reductions turn out to be so easy to achieve that the market has collapsed. The credits are almost worthless, as everyone has been able to meet targeted goals.

How else can you explain the collapse? Isn't this an example of the laws of supply and demand at work?

people used to say
that we would never be able to compete with Japan and Korea on wages.

They were wrong.

As countries develop, their wage rates rise.

The same will happen (is happening) with China and India.

no holes, just bad ideology
The US is also investing in education. We could do more, but the teacher's unions are preventing it.

If intelligent people want to work in Europe, why is Europe suffering such a tremendous brain drain?

Economic growth has very little to do with resource extraction. It has everything to do with knowledge and a political system that allows people to benefit from their own knowledge and efforts. The latter is why Europe is suffering, and why the best and the brightest so frequently decide to leave.

So, you believe Clinton was in the pay of the oil companies? He never even bothered to send Kyoto to the senate.

I also find it interesting that our self declared world class scientist doesn't know the difference between relative and absolute.
On an absolute scale, the oil companies are making a lot of money. But that's because they sell a lot of stuff. On a relative scale, profit as a percentage of sales, which is the scale the rational person uses, oil companies are way downthe list in regards to profitability.

roy's continued delusions
If the goals are so easy to meet, why is it that most European countries are announcing that they are going to miss theirs?

Another question
If the goals are not easy to meet, why aren't the emissions credits worth more on the market?

Europe, trouble in paradise?
"Third, Europe offers a higher quality of life; better living environment, less work hours, earlier retirement, more leasure time, better health care, etc. So, intellegent people will naturally want to work in Europe. "

"What’s the problem with Europe’s universities?

The performance of developed economies is closely related to their ability to create, disseminate and apply knowledge. These three poles - education, research, innovation - are known as the ‘knowledge triangle’. Unfortunately, Europe has fallen behind in all three parts of the knowledge triangle, and needs to improve its performance in each of them. The problems with Europe’s universities centre on the following: "


"Around 20 million jobs need to be created in the EU-25 to meet the overall target of bringing the Union back towards full employment. The targets are:

1. Overall employment rate (2004: 63%, target 2010: 70%)
2. Female employment rate (2004: 55%, target 2010: 60%)
3. Employment rate for workers over 55 (2004: 40%, target 2010: 50%)"

http://ec.europa.eu/growthandjobs/areas/fiche08_en.htm

Maybe you should take a closer look at Europe. It's not quite paradise.

Market collapses
The US and Australian governments have opted out of Kyoto over economic concerns; and this new analysis of four European states from the International Council for Capital Formation (ICCF) endorses their view that the protocol will prove expensive.

"No country will want to sacrifice its economy in order to meet this challenge," he told a London conference last week, commenting further that talk of frameworks and targets "...makes people nervous".

http://news.bbc.co.uk/1/hi/sci/tech/4415818.stm

Prices collapse when no one wants to buy. Especially a product that has no intrinsic value.

That's a laugh, this entire post is BS
Where do you get this stuff, out of a cracker-jack box???
Several EU nations are talking about pulling away from Kyoto because they can't meat the reductions by the deadline.

Credits were given out to industrial "polluters" who, low and behold, didn't pollute as much as the government thought they did. There are too many credits out there and no one, outside of Europe, gives a rats behind. European companies are stuck with the worthless credits, there is no exchange.

Again, Kyoto, and everything associated with it, is proving to be a big boondoggle. BTW, this administration had nothing to do with Kyoto not being signed. Remember President C-L-I-N-T-O-N? Yeah, he wasn't dumb enough to even try and get it through the senate and it died with his administration.

Sorry roy, not everything in the world is Bush's fault.

No holes, except possibly where you don't want them
This is just dopey. "Third, Europe offers a higher quality of life; better living environment, less work hours, earlier retirement, more leasure time, better health care, etc. So, intellegent people will naturally want to work in Europe. "

Believe what you want, it is only true for the 60% who have a job.

There there's this - "America's financial prowes has been based on natural resource extraction and technology. The former is running out an the later is losing ground."

I keep hearing we are running out of natural resources, yet I also keep hearing about the resources that are being discovered and locked up by those who say we are running out of resources.

Which natural resources are we short of? Bet I can tell you where to dig or drill to find some.

The only holes I can find are in your education on a number of subjects. Better research this a bit.

I guess
Okay, so your view is that people are betting there will be no market because the EU will not be continuing their carbon credit program.

I'm not sure that makes sense, but okay. If they don't fall within the target range and don't buy credits they can just pay the fine.

You are being rediculous now.
Mark says "So, you believe Clinton was in the pay of the oil companies? He never even bothered to send Kyoto to the senate."

The terms of Kyoto were not settled until after Goerge W Bush took office. So how could Clinton have sent the treaty to the congress to be ratified?

There are fewer problems with EU universities than with those in the US
I am working at one right now.

Moreover, universities across EU are "craddle robbing" US intellecual property, i.e., US scientists. I know Lausanne just hired 5 or so US scientists from full professor ranks in order to enhance their ability in hydrology.

The US universities cannot compete in that regard because the US does not put nearly the amount of investment into their faculty.

On the other hand, it will cost about $50,000 to send your son or daughter to get a BA or BS degree in the US, assuming you send them to a state-supported "public" college. Private schools cost much more.

In EU, students go for free, and they get meals and housing free as well.

That is what EU calls investing in the future.

In terms of employment, EU counts everyone. The US unemployment figures are taken from "the labor force". And we have all seen the labor force numbers dropping over the past five or so years. People who have not been actively seeking employment in the last three months are simply no-accounts in the US.

In EU, the unemployed are known because they are fed and otherwise supported until they can find employment.

I hate to thorow my hat one way or the other. But let's just say that the quality of life is higher in the EU, and if you haven't lived here, you really don't know what I am talking about.

I did not say that EU had more resources
I only said that the US financial prowes was based on resources; oil, natural gas, wood, minerals, etc..

Nor did I say that we were running out of natural resources, although the US importing more than half of it's gas and oil does throw up some red flags.

Some say that the US invaded Iraq simply give US oil companies acces to Iraqi oil reserves.

The falling value of the US dollar has more to do with oil changing over to a Euro base from the dollar than anything else. So now the US must compete using Euros in international trade.

The evidence is that EU countries are not going into debt as quickly as the US and so the dollar is losing relative to teh Euro.

Yes. That wil happen
Of course an equal wages means more equity in standards of living.

What Freidman predicts is that while the standard of living will continue to improve in the developing nations, that of the USA will decline.

Workers int eh US are already having to work much longer hours, and have more than one person working per household, just to have standards of living close to that of those in the EU.

Add that to the fact that the healthiest US person is on par with the least healthy persons from UK, and the US person will spend over twice as much on health care than their counterpart in UK (or so the says the recent study publshed in Lancet), and well, it's not a pretty picture.

Free Markets
You seem to believe that free market forces should prevail in a purly contrived market.
Free markets are just that, FREE.
Where people can trade what they choose to trade. When an artificial commodity is created, an artificial, controlled market is created.
As far as fines go, who will enforce the fines? The signatory countries? All they need do is withdraw,change the law or ignore it.

FREE?
"In EU, students go for free, and they get meals and housing free as well. "

You have been in Europe too long.

"The US unemployment figures are taken from "the labor force"."
Who else would you count, those eligible and willing and able to work? And this does not count illegal workers. If they were counted, the US would have negative unemployment.

And as far as quality of life, that is purely subjective.
What I observed in my few months in Finland and Norway, nearly all are solid lower-mid middle class and they know they cannot do much to change that. If they work harder, they are not rewarded. Is it any wonder they all drink so heavily. I was told that Norway had the highest per capita consumption of yeast. And it is not because of bread.
And, don't forget all of the muslim immigrants in Sweden and the rest of Europe who are DEMANDING that Europe change to accomodate their laws.
No, you can stay in your paradise.

There are many metrics to gage "quality of life"
One is longevity or life expectancy at birth. EU wins

Another is infant mortality rate. US is very poor in that regard.

Another is leisure time. EU wins.

Another is cuisine... need I say more?

Another is education; EU wins.

Another is creativity and intellectual capacity. Well EU has more Nobel Prize winners than the US, for what that is worth.

Another is in cost of health care and other living expenses. Yup, EU wins again.

So, what would you call quality of life?

Clinton had nothing to do with it.
The terms of Kyoto were not finalized until Bush was in office.

This is one you cannot pin on President C-L-I-N-T-O-N, as you so mistakenly put it.

Don't worry, Europe is depopulating, no people no jobs!
"Over the next quarter-century, the number of workers in Europe will decline by 7 percent while the number of over-sixty-fives will increase by 50 percent, trends that will create intolerable fiscal difficulties for the welfare state across the continent. The resulting inter-generational strains will place great pressures on national politics, and those pressures may, in a variety of ways, put paid to the project of “Europe” as it has been envisioned ever since the European Coal and Steel Community, the institutional forerunner of today’s European Union, was established in 1952. Demography is destiny, and Europe’s demographics of decline—which are unparalleled in human history absent wars, plagues, and natural catastrophes—are creating enormous and unavoidable problems."

"a rejection of the belief that human beings, however inadequately or incompletely, can grasp the truth of things—a belief that has, for almost two millennia, underwritten the European civilization that grew out of the interaction of Athens, Jerusalem, and Rome."

"But the problem goes deeper still. For one thing, however loudly European postmodernists may proclaim their devotion to the relativity of all truths, in practice this translates into something very different—namely, the deprecation of traditional Western truths, combined with a studied deference to non- or anti-Western ones. In the relativist mindset, it thus turns out, not all religious and moral conviction is bigotry that must be suppressed; only the Judeo-Christian variety is. In short, the moral relativism of Europe is often mere window-dressing, a mask for Western self-hatred."

"Nihilism rooted in skepticism, issuing in the bad faith of moral relativism and Western self-loathing, comforting itself with a vacuous humanitarianism: not only is this not marvelous, it has contributed to killing Europe demographically, and to paralyzing Europe in the face of an aggressive ideology aimed at the eradication of Western humanism in the name of a lethally distorted understanding of God’s will. Those who love Europe and what it has meant and still could mean for the world had better hope that Marcello Pera and his allies among believers, and not Bishop Holloway and his fellow debonair nihilists, are the ones who will prevail in the contest to resolve Europe’s two culture wars."

We should have let the Germans take over.

OPPORTUNITY

NOOOOOO
"I only said that the US financial prowes was based on resources; oil, natural gas, wood, minerals, etc.. "

Rule of law, private property rights and individual liberty will over come natural resources any day.
Russia should be the wealthiest country in the world as should Nigeria, Boliva, Venezueala, Zimbabwe used to be ,...

No Doubt About It, the World Is Warming
Science 12 May 2006:
Vol. 312. no. 5775, p. 825
DOI: 10.1126/science.312.5775.825
http://www.sciencemag.org/cgi/content/full/312/5775/825

News of the Week
GLOBAL CHANGE:
No Doubt About It, the World Is Warming
Richard A. Kerr
Global warming contrarians can cross out one of their last talking points. A report released last week* settles the debate over how the atmosphere has been warming the past 35 years. The report, the first of 21 the Bush Administration has commissioned to study lingering problems of global climate change, finds that satellite-borne instruments and thermometers at the surface now agree: The world is warming throughout the lower atmosphere, not just at the surface, about the way greenhouse climate models predict.

"The evidence continues to support a substantial human impact on global temperature increases," added the report's chief editor Thomas Karl, director of the National Climatic Data Center in Asheville, North Carolina. The additional support for global warming will not change White House policy, however. Michele St. Martin, spokesperson for the White House Council on Environmental Quality, says President George W. Bush believes that greenhouse gas emissions can be brought down through better use of energy while the understanding of climate science continues to improve.

Critics who blasted research under the White House's Climate Change Science Program (CCSP) (Science, 27 February 2004, p. 1269) as mere obfuscation might not have expected such a forthright conclusion from the report. Karl attributes the clarity to the CCSP approach. "For the first time, we had people [who initially disagreed] sitting down across the table. That's a tremendous advantage," he says. "The process is great for improving understanding. It led to not just synthesis but to advancing the science." The CCSP synthesis and assessment process prompted new, independent analyses that helped eliminate some long-standing differences, Karl says.

The 21 authors of the report included researchers who for years had been battling in the literature over the proper way to analyze the satellite data. Meteorologists John Christy and Roy Spencer of the University of Alabama, Huntsville, were the first to construct a long record of lower-atmosphere temperature from temperature-dependent emissions observed by Microwave Sounding Units (MSUs) flown on satellites. By the early 1990s, Christy and Spencer could see little or no significant warming of the middle of the troposphere--the lowermost layer of the atmosphere--since the beginning of the satellite record in 1979, although surface temperature had risen.

In recent years, report authors Frank Wentz of Remote Sensing Systems in Santa Rosa, California, and Konstantin Vinnikov of the University of Maryland, College Park, led separate groups analyzing the MSU data. They and others found atmospheric warming more on a par with the observed surface warming (Science, 7 May 2004, p. 805). Hashing out those differences over the same table "was a pretty draining experience," says Christy.

In the end, the time and effort paid off, says Karl. The report authors eventually identified several errors in earlier analyses, such as not properly allowing for a satellite's orbital drift. They had additional years of data that lengthened a relatively short record. And they could compare observations with simulations from 20 different climate models, which researchers had prepared for an upcoming international climate change assessment.

The report authors found that over the 25-year satellite record, the surface and the midtroposphere each warmed roughly 0.15°C per decade averaged over the globe, give or take 0.05°C or so per decade. The tropics proved to be an exception: The models called for more warming aloft than at the surface lately, whereas most observations showed the reverse. Reconciling that discrepancy will have to wait for the next round of synthesis and assessment.

www.climatescience.gov/Library/sap/sap1-1/finalreport/default.htm

What does that have to do with EU?
Intersting enough, I saw this in passing on Wikipedia ???

"The largest sector in the United States economy is service, which employs roughly three quarters of the work force.[38] The economy is fueled by an abundance of natural resources, such as coal, petroleum, and precious metals. However, the country still depends upon foreign nations for large amounts of resources, such as petroleum."

http://en.wikipedia.org/wiki/United_States

I like this because it reinforces my convictions.

And...
The myth of class mobility in the US is just that.

Class mobility is operative in EU because their education system is based on intellectual achievement, not family wealth.

Only the wealthy can afford to send their children to the good US universities.

Artificially controlled markets
Futures, hedge funds and a host of other sophisticated financial instruments are all just examples of contrived markets. There's nothing different about carbon credits.

Similarly all financial instruments are only as good as the regulatory environment that permits their safe trade. They all exist in artificially controlled markets, such as the NYSE. Without rules guarding your money from harm, I doubt you would buy any kind of pig in a poke. And rules are subject to change, so let the buyer beware.

The real issue here is that you are scraping the bottom, trying to find some way of disapproving of their existence. Fine. Don't trade in them, you might lose money.

Thank you for the reference.
Yes low birth rates are a problem in much of Europe.

Putin called for Russian men to 'rise to the occasion' as recently as this past week.

Low birth rate is a problem in the country where I am as well. Sex is thought of more as a body function. So birth control is easy to come by.

Also, the lessons of the great wars of hte 20th century are apparent here. Low birth rates are thought of as a reasonable alternative to war (as a means to control overpopulation). The US has not had to deal with that.

So woopee, when I go to Utah, everyone wants to have way too many kids.

Opportunity
Boy, you are really class conscious.

First, what are good universities?

And second, opportunity does not require a university education.

The USA has more than its share of millionaies who never even completed high school. Dave Thomas, founder of Wendy's for one and Rush Limbaugh never went to 'university'.

And I would not say the the EU is doing all that well 'intelectually' either.

Utah economy
The Utah economy is pretty strong.
They have a very responsible church workfare system and everyone is supposed to go on missions, some around the world, at their exepense, so they have a very well educated population.
It is not the numbers, it is how they are raised.

Yes and they are great supporters of war
The reason why Utah's economy is doing well is that goverment is the largest employer there. The US military is spending like crazy and Utah is eye-ball deep in defense contracts. Hill AFB, the bombing ranges out in the deserts, the former Morton, Thiokol, and Hercules, as well as the spy satellite industry, all snatched up by ATK.

As for the kids? Cannon fodder. You need lots so you can lose a few an still make money.

There is just as much opportunity in EU
Perhaps more so with outsorcing being relatively new and with the eastern EU countries coming on boaard, there is lots of distribution opportunity.

I guess you do not agree that the future is about technology, communications and intellectual property (like Friedman argues in his 'earth is flat' book)

The people you reference made their millions in food service and political lying.

Ain't it great
In the USA, one doesn't need a degree to become a millionare or billionare in the case of Bill Gates. Tenacity and a dream will carry you much farther in the USA than a degree from any institution of 'higher learning'.
The future is what you make of it. Rush had a passion, met a need, made fortune and changed the world.

Germany
Let's see what a education can do to improve Germany's economy.
They elected a physicist.
Hopefully she will borrow heavily from Austrian economists.

Why do you think that opportunities do not exist in Europe?
The future is what you make it.

On the other hand, it helps if you know what you are doing.

Europe has an educated population (and workforce) relative to the USA. Except for immegrant, the people here understand multiple languages, understand sciene, politics, environment concerns, etc. Education leads to a higher quality of life.

And that is another raison why EU has a higher quality of life than in the USA.

Not just the economy, but
Society a a whole is better off with an educated populus.

Also, as educated peopel have more rewarding lives. So the better education system is another reason why EU has a higher quality of life.

And as for your philosophy regarding people being able to be millionaires without going to school, there are, of course, similar stories here in EU (like the owner of Colnago bicycles).

On the other hand, one is more certain of fidning a productive place in society when choosing the education route.

A bird in the hand is worth two in the Bush.

Why are their economies doing so poorly?
Riots and strikes and France.
Mandated 35 hour weeks. Guaranteed employment.
There are a few countries that are growing and expanding, but they don't follow the EU models.

Depends
,,,upon the educaton.
If they are taught how to think and not what to think.
I live in MA which has a fairly highly educated workforce. MA is the only state losing population.
If the leaders or voters were so smart, why are poeple leaving the state?
I think education is important, but it is not and should not be the end all. Application of that education is what makes an economy.

Case in point:
"Professionals and executives, people under age 50, people with post-graduate educations or with incomes above $100,000 were more likely than other emigrés to move to the Mid-Atlantic and to cite a better job as a major factor for moving, the poll suggested. Their exodus represents what some policymakers term a brain drain."

http://www.boston.com/news/local/articles/2006/05/14/most_who_left_state_dont_plan_to_return/?page=2

And if you look at the number education istitutions in the Boston area: Harvard, MIT, BC, Tufts, ....it is a college town. Why can't they create opportunities here?

The only reason Harvard could exist was because of the hard work of the early settlers to MA. The believed in a strong work ethic and in the Bible. MA was resource poor compared to the VA colonies.
Now, look at how Harvard treats its president. These institutions have ignored their history and have decided they are the end all and be all of life.

According to the US Census Bureau
North Dakota take shte prize for negative population growth between 2000 and 2004.

Massachusets' growth was about 1%, relative to 4.3% for the USA as a whole. But there are other states that did not grow so well, Ohio, West Virgina, Iowa, Kansas, South Dakota, etc.

There is a trend for population to grow in the states that have laws favoring retirees; Florida, Arizona, and the like.

I note that Wyoming, Montana, and Idaho have turned around their waning populations. I suspect the former two are due to energy; coal and natural gas development jobs.

But I think we are off the point here. I was saying that EU and China consider technology to be the future area of growth and that education is the key to technology. So they are invensting in that.

I also stated that an educated person lives a better life. That is why the university extension often calls adult evening classes 'enrichment'.

But I do understand your point, that the US should not value education, and put money into educating the public. In fact this is the way things are and remain so. Publoic schools were bad when I was growing up (in the 50's and 60's) and I do not see any great incentives to change the way education is valued or funded in the USA.

Because of family ethics and finances, I was able to go to private schools. I have done well and am able to travel and learn from other cultures, and to apply what I learn to my financial advantage and to the advantage of the US economy. As will my children.

The education ethic is something that is apparently passed on in families. Ok, there is genetic factor having to do with intellegence. But there is also an ethic of making decisions based on knowledge that passes on generation to generation.

But I can apprecieate and honor your point of view. There is no reason for anyone who does not want education to be forced to have it.

The easy answer is the old saying...
Different strokes for different folks.

I worked in DC for a while. Couldn't stand it. Too much tension and way too expensive.

I like Europe. Some, I guess, like Stillwater Iowa.

Different strokes.

Some countries are doing better than others.
Economics is an overrated discipline. What good is money if people are not happy?

The riots are due to something else. You would have to see north Paris to get that.

The recent student strikes, on the other hand, are democracy in actions. You really have ti love the French for their sense of public good and national pride. They are true capitalists and they are true equalitarians. They have a proportional representation democracy. If ever the public felt their voice was no longer heard, there would be a big shake up in congress.

The French may be the world’s shining example of liberty, but other classic European countries have similarly democratic societies. The Spanish were very much opposed to the invasion of Iraq and the first to oust a leader for not listening to the people’s voice. Recently Italy ousted a well-entrenched leader who controls the media, and probably UK will be next. Germany can’t seem to get its economy going strong. They are still being hit with law suits to pay war reparations to Jewish people, they have been strapped with no military to build their economy on, and of course, there was the recent merging of east and west with all the problems that brought.

On the other hand, Germany has done an excellent job of retraining the east and putting people to work cleaning up the environment. They stand as a shining example of what can be done to improve the environment, though the western cities still need attention in that regard.

No, what you say is too simplistic. Also, if the capitalism was to collapse, and it is not certain we are out of the woods yet, I don’t think these societies would fare as poorly as the US where there is too much emphasis on money on les on liberty, freedom, and life.

So you can say what you will about students demonstrating, lower work hours, and unemployment figures. But my observation is that people live more freely in Europe.

They are also more engaged in life, not so much with the processes of material accumulation and gaining wealth. Not everyone is this way. It is just a trend.

What Arrogance!
" Ok, there is genetic factor having to do with intellegence."

It sounds like you belong in a culture where family connections, status, and educational pedigree are more important that capability.

That is what made the USA and Austrailia great. They could shed the aristocratic BS and be judged by their accomplishments, not their family or educational pedigree.
The US east coast suffers from this now. Fortunately, the US west still respects accomplishment, not pedigree.

Not really
I'm third generation Eastern European potato famane escape immigrant family who lifted themself out of the gutter of starvation poverty through hard labor. My father and step father both died young of occupation health issues contracted working in the toxic factory environments in industrial Detroit.

They knew that the only way out of this condition was education so they gave their life to educate their children.

They were right. When I go down to Southeastern Texas or Southern Louisianna, you now the Cancer Corridore, I see people working and dying in a corporate feudal state because they do not have enough education to pull themselves out of that situation.

If that is what you want four your children, I can understand that. I am not telling you that you are right or that you are wrong.

But mine won't be in that situation.

No Subject
>"The terms of Kyoto were not finalized until Bush was in office.

This is one you cannot pin on President C-L-I-N-T-O-N, as you so mistakenly put it."

Don't you just love it when liberals decide to reveal what clueless and ignorant idiots they are? I got a great chuckle out of "stephen" on this one.

I'll bet that he will next try to tell us the Byrd-Hagel Resolution was passed in favor of Kyoto!

The "Kyoto Protocol to the United Nations Framework Convention on Climate Change" was completed on December 10, 1997 and signed by Al Gore on behalf of the United States. This was over three years before George Bush took office. That liberal hero, Slick Willy never submitted it to the Senate for ratification.

One can only marvel at the chuckleheaded fools who believe leftist groupthink is a substitute for critical thinking skills.

And Stephen, don't try to claim the various COPs held to date mean the Kyoto Protocol wasn't "finalized" on December 10, 1997. Well, go ahead and try. I'll have yet more fun outing you... :-)

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