Interest Free Credit Accounts

Have you ever wondered why banks push credit cards at every opportunity?  Have you ever wondered how they can give you interest free credit if you pay your credit card each month? Have you ever wondered why banks tolerate such a high degree of defaults on loans?  The answer is that credit card debt is very very profitable even with high default rates. Those of us who pay our credit card debts on time pay for these excess profits and pay for the bad debts of others. We can change the system.

Banks make money from merchant transaction fees, credit card interest fees, and account management fees.  Any of these fees on their own would give the banks a handsome profit.  Credit card interest fees are so high because banks push credit cards onto people who will never repay.

Any community can get rid of most of the fees and charges for credit by requesting the banks set up a system to stop credit card loan defaults, to reduce the cost of merchant fees and to remove the need for account keeping fees.  It can do this by getting a bank or banks to create a system of interest free credit for its citizens for the exchange of goods and services. This can be done within the existing banking regulations and in a way that banks will still make a profit. If existing banks are not prepared to offer the community interest free credit then the community should create its own bank and use its own savings to establish interest free credit for its citizens.
Let us assume a community needs a billion dollars of money in circulation for day to day commerce. If the community deposits one billion dollars in a bank then the bank is permitted to create another billion dollars and lend it out. Typically banks lend the new money out for more interest than the interest they pay on the original deposit. The margin between the interest rates enables the bank to cover bad loans and operating costs.
However, the bank can make a profit from interest free loans if it can be assured that the money it creates from the loans does not move from the bank. That is the loan money remain on deposit somewhere within the bank. This money is then risk free and there is no need to collect interest to cover defaulting loans.  The bank can still profit from transaction fees on the movement of money.
One way to do this is for the bank to issue a credit card with restrictions on the use of the credit. The credit can only be used for goods and services with other members who also have credit accounts with the bank. Any money paid from an interest free credit account must be deposited in another interest free credit account.
The system only works if members continue to use their credit account. To ensure this happens a member, on opening an account, agrees to continue to pay the supplier from the same credit account. If they stop paying the supplier through the credit account they agree to repay the credit. This would be enforced by the suppliers who would welcome such a restriction. If the system becomes widespread and is used by most suppliers then it becomes very difficult for a person to stop using their credit account for most payments.
With this system some members of the community will accumulate more money than they can use and others will run out of credit. Also some members will wish to purchase goods and services from people who do not have interest free accounts.
These problems can be overcome by members being able to sell interest free money and receiving in return interest bearing money.

With modern technology such a system is easy and cheap to build. Compliance is enforced by the bank because it controls where the money is transferred. Any community can institute a regime of interest free money. Such a system will remove interest on credit card balances and remove overdraft fees for businesses.

This approach is the same as Local Exchange Trading Systems but implemented with existing currencies.

The bank or other institution that sets up a system will profit from the transaction fees which can be set at a level to cover the interest cost plus a reasonable profit on the original deposit.

Reducing the Cost of Public Infrastructure

The following submission is a response to the invitation from Minister Barr for Canberrans to give their ideas on the upcoming budget for 2012.  http://www.treasury.act.gov.au/budgetconsultation/2012-13%20Budget%20Consultation.pdf This submission is not one on suggestions on spending money but a suggestion on reducing the cost of funding capital works and community infrastructure. By reducing the cost of funding  more can be built with the same taxing base or taxes.Like almost all governments the ACT government is failing to use community credit to benefit the community.  Governments have been persuaded by private interests supported by a flawed economic theory and accounting practises to privatise community credit instead of using it to fund community infrastructure.

It wasn’t always like this.  In 1911 Sir Denison Miller was appointed as the first governor of the Commonwealth Bank.  Within a few years the Commonwealth Bank was the largest deposit taking Bank in Australia.  During Miller’s time the CBA funded the First World War and community infrastructure such as roads and ports without going into debt.  At the time the CBA did not have the authority to issue currency but it did have the backing of the Commonwealth Government. It achieved these remarkable economic achievements without borrowing but used the credit worthiness of the people to fund community projects including the First World War.  After the death of Miller control of Australian Credit was returned to London and Miller’s bold experiment stopped.

Most Governments have been persuaded to give the people’s credit to private interests but there have been some notable exceptions. The post-war reconstruction of Germany and Japan were built on government credit.  China’s economic rise has been achieved through government credit. The USA rose from the great depression through their government funding the Second World War. The Tiger economies of Korea, Taiwan, Hong Kong and Singapore have achieved success through government funding of community infrastructure to benefit exporters.

The allocation of credit through the creation of new money is an old idea generating interest in the USA and Europe.  Ron Paul, a candidate in the Republican presidential nomination, advocates the State taking back responsibility for money creation from the Federal Reserve. The British New Economic Foundation http://www.neweconomics.org/projects/monetary-reform outlines many strategies for communities to take control of their own credit.  This article outlines possible ways for the ACT community to achieve the same goals.

The ACT government can change the course of ACT economic development for the better by taking control of community credit and using it for the benefit of the community. It requires imagination and courage but no legislative or banking changes. The remainder of this submission outlines how, over the years, the ACT government can reduce the cost of funding capital infrastructure by at least 50%. These savings can be used on new projects, or to get the budget back to surplus and/or to reduce taxes.

How to Generate Community Credit

The ACT Government has control of investments of over 3 Billion Dollars.  These funds can be leveraged without risk, through the banking system, for the government to generate loans to the community it supports.  An existing bank could be approached to work with the ACT Government.  If no bank can be found then Australia Post could be approached to act as banker to the ACT or if necessary the ACT could create its own bank.  That is, the ACT government could use an existing bank or create its own bank capitalised with the 3 Billion in existing ACT government investments.  The Bank does not loan the capital or put it at risk but uses it to satisfy the banking accounting regulations.  This book keeping exercise enables the government to create constructive community debt as outlined in the article titled “Want to end the GFC – put debt to good use”.

The ACT Government Bank, or a commercial bank, could issue loans, up the value of its capitalisation, to the ACT Government at whatever interest rate it wishes, provided the debt was used to develop the community within the ACT.  The loans are given to the ACT community and guaranteed by the community through the ACT government. This means there is no point in charging interest to cover loan default as the community itself is the party at risk.

The Bank could use new loans to buy back all existing government debt held with commercial banks and replace it with zero interest debt.  This will put 70M directly to the ACT government bottom line from interest savings.  The bank creates the money for the loans through the fractional reserve system.

Because of the reduction in interest payments the budget will be in surplus.

The Bank could issue every ACT resident, who wants it, with $5,000 in interest free credit. This can only be used with businesses who agree to accept the credit and leave the funds in the ACT bank at zero interest.  This would be implemented with an ACT Credit Card. Children’s credit would be added to their parent’s credit card. The Bank will collect merchant fees of 0.5% which will cover all the Bank’s operating expenses both for the credit card operation and interest free loans.  This will reduce the cost of doing business in the ACT. It is likely to result in a decrease in interest debt for ACT residents, rather than an increase in spending, as people move to pay off interest bearing credit cards.

The ACT government can reduce the cost of new housing in the ACT while still keeping land prices high by funding house mortgages for new dwellings using the scheme outlined in the article titled “A house for half the cost – here is how” .  The Bank could offer to buy out existing home owner mortgages with the new loans. This will reduce the time mortgage holders need to pay off their mortgages and would be a safe investment for the Bank.

The ACT Government could issue interest free investment Energy Rewards.  The Energy Rewards must be invested in ways to reduce the level of green house gases either through investments to save energy, take green house gases out of the atmosphere or produce emissions free energy.  This will enable the ACT government to move rapidly to meet its greenhouse gas targets.

The ACT Government, through the involvement of its citizens in similar schemes to Energy Rewards, can embark on improving the ACT environment by increased investment in schooling, health, public transport and new innovative industries.

Summary

In the same way that the cost of a house can be halved through reducing finance charges so the cost of ACT infrastructure can be halved.  This means the ACT can build twice the infrastructure for the same cost.  The system is self perpetuating because as old loans are paid off so new loans can be given.

As part of the scheme the ACT Government could produce a real time economic indicator website from data collected by the bank.  This will show the flow of money within the Bank and it will be available to all citizens so that everyone can see how the bank is performing.  This transparency will alert citizens to any problems that might arise by making the bank – and the government – accountable on a real time basis.  Instead of stock market reports the nightly news will show real-time indicators such as loans outstanding, private investments, bank profits, credit card debt and payments through the bank.

These benefits all become possible because of productivity improvements obtained by reducing finance costs through the elimination of interest on newly created money and the elimination of interest paid on interest.  It should be noted that interest is still paid on savings and that commercial banks can still operate in exactly the same way they do today.  The difference is that there is a competitive alternative on how community credit is used and the way assets are transferred between citizens.

Submission to Senate Committee on Small Business Finance

Inquiry into Access of Small Business to Finance

Reference

http://www.aph.gov.au/senate/committee/economics_ctte/small_business_10/index.htm


The structure of the financial system means that large business and governments have easier access to finance than small business.  Finance for small business is costly and difficult to obtain. 

Finance costs can be substantially reduced by reducing the cost of credit and making it more accessible to all businesses both big and small. The cost of credit can divided into two parts. There is the risk that the credit will be dishonoured and there is the cost of money itself.

Most Australian dollars are created as a result of banks creating interest bearing loans secured against existing assets.  Most interest bearing loans are issued by the commercial banks. The Reserve Bank also makes interest bearing loans to banks but this is a small percentage of the loans, and hence money, on issue. Because money is created through interest bearing loans this means that there is a fixed cost of providing money that is in addition to the costs associated with the use of the money. The Reserve Bank also creates notes and coins. These attract no interest. Because notes and coins attract no interest the cost of payments using them is lower than the cost of payments using electronic money. Removing interest from electronic money used for payments will reduce the cost of doing business – particularly for small business.


The reason the financial system generates money through loans backed by existing assets is to ensure that loans get repaid. That is, if the loan is not repaid then the issuing bank can seize the asset and sell it and so repay the loan. 

However, money can be created without monetizing existing assets. We can create interest free loans and ensure that the money gets repaid by putting conditions on the use of the money.  With modern technology we can ensure that recipients of loan money with conditions, automatically comply with the conditions on the use of the money.


We can use interest free loans judiciously to remove the current disadvantages suffered by small business. These loans will not alter the existing financial system which will continue to provide financial services without interruptions.


Exchange of Value

If the money used to exchange value is NEVER loaned then there is NO risk to the money. Because it is not loaned then it earns no interest. We can create interest free money with the provision that this money only ever moves into other interest free trading accounts.

If interest free money for trading is introduced into the financial system then it can eliminate interest costs on money for trading for small businesses including farmers.  It does NOT eliminate credit fees, which may be in the form of interest on the credit, but it eliminates interest on money used for trading.  It is the electronic equivalent of cash and will remove the need for most short term overdrafts.   


The system works by the credit risk of trades being taken by suppliers rather than banks through overdrafts. Any business that now offers credit to its customers does this today. Any small business that does not get paid immediately by governments and large organisations does this today. With interest free money that can never earn interest the supplier can use their own credit to finance purchases from their suppliers. Large businesses, and governments, typically delay payments while insisting on rapid payments from small business and individuals.  Interest free credit levels the playing field.


If a customer does not pay a supplier the supplier has to take a loss on the bad loan – just as they do today. The difference is that the bank has not had to replace any money. The interest free money that was used and passed between participating entities is still in the system and so does not have to be replaced by the bank. If a customer does not pay a supplier in effect the debt has passed to the supplier and the supplier has used some of their credit without compensation. Suppliers will be careful with issuing credit and will only issue credit to those who are likely to pay.


Payments systems that operate along these lines are sometimes called mutual credit systems or Peer to Peer financing. The Swiss WIR business network has operated this way since 1934. The network has 60,000 Swiss businesses. http://www.swissinfo.ch/eng/business/Cash_substitute_greases_business_wheels.html?cid=7613810


A variation on this system that takes advantage of modern communications and computing technology could be easily set up in Australia. The following outlines one possible way it might be implemented.

Any bank, or all banks, that wish to participate can join the system.  Businesses and consumers signup to participate in the system. If we assume the fractional reserve for a bank is 10% then the borrower deposits 10% of the credit they need in an interest free account. Initially there will be a limit on the amount of credit that any person or entity can create. Let us assume that it is $5000 for individuals and $100,000 for small business. Governments will lead the way by agreeing to accept payments for taxes and other fees and charges with money from these interest free accounts.

The limit on the total amount of credit available to any borrower is determined by the willingness of other parties to offer credit – not by the availability of money.  Suppliers will not offer credit if the buyer is too heavily in debt and so suppliers will rarely increase the money supply to accommodate bad risk buyers. 


This credit money can only be used be used for the transfer of value between participating businesses. The money cannot be lent nor can it earn interest. Because the loan does not earn interest it has a value of zero on the books of the bank and it can be transferred between bank accounts without affecting the books of the bank.


Some businesses will accumulate more interest free money than they need for trading with other parties. They can sell this money back to people who need credit. Because a business has to deposit money to get credit and because credit will dry up if a business has too many loans it will be more attractive for businesses to purchase excess credit money from other businesses than it is to create more credit money.


The net effect of this approach will be that money used for credit between participating businesses will have no interest charges.  Credit itself may have an interest charge but that is a matter between the business offering credit and the business borrowing.


Banks still offer a service of overdrafts and they can assist businesses assess the credit worthiness of other potential borrowers and they will charge transaction fees on the movement of money. Banks may find the new system more profitable because they do not have to assess the credit worthiness of each business nor do they take a risk on credit.


Interest free credit is an alternative to credit and debit cards for individuals. 


The system is voluntary and does not need any new legislation or new initiatives. It just needs a bank to start offering the service.

Equity Investment

Conceptually equity investment is the same as exchange of value but on a longer time scale. Here, instead of goods being traded, ownership of assets is traded. The current financial system creates money through giving credit by exchanging part ownership of existing assets.  This works well for existing assets as the ability of the assets to generate income enables the borrower to fund the credit.


However, credit is generally not available to build future assets. This means that to build new assets money has to be obtained from savings or from loans on existing assets. This increases the financial cost to build new assets as the builder of the new asset has to pay the cost of money plus the cost of the risk of the new asset failing to generate income. It  means that relatively little money is available for expansion of assets compared to the amount of money available to purchase existing assets because there is no loans mechanism available to fund new assets. 


The lack of money to build new assets stifles productivity gains because productivity improvements come from investments.  The lack of money is particularly acute for small business as they do not have the asset base on which to generate money for investment through the creation of loans.


The problem of funding new investment can be overcome by the community (government) providing no interest money for equity investment in NEW assets through the issuing of no interest credit to construct new assets. The money from these loans must be invested in new assets. That is, the money purchases ownership or gives equity in the new assets. How much ownership is transferred and the value of that ownership is a matter between the buyer and the seller.


The main problems with this scheme is that there has to be a limit on how many interest free loans are created and who gets the right to take out interest free loans for investment purposes.


This is an area for government policy.  The approach can be used to direct investment in areas of community need where private investment through traditional equity markets is not providing the funds needed to build new productive assets. Small business investment is one area where interest free loans can be given for new investments and the Federal Government is already doing this through the Department of Innovation, Industry,  Science and Research with its commercialisation loans for small business. Unfortunately there is little money available and the administration overheads in running this program are very high – but the principle has been established.

This approach could be broaden to the wider community through giving the right to take out interest free loans to all the population.  The money from these loans is required to be invested in areas of need in the community. Such an area is investment in new renewable energy assets or in ways to save energy or to reduce the level of greenhouse gas in the atmosphere. With interest free loans almost all renewable energy investments will be immediately profitable because most of the costs of investment in renewables are finance costs of interest and repayments. Repayments would still be made but there would be no interest costs.


The approach could be made even more effective if the right to loans was given to the population in inverse proportion to their consumption of mains electricity. This would provide positive feedback where the less energy consumed the more investment is made in ways to save energy.


This approach would be particularly important to small business because small business is better able to take advantage of new technologies and to give higher returns to investors. 


After the approach is shown to work by reducing greenhouse gas emissions other areas that desperately need investment, such as housing for the homeless, investments in conserving water, public transport and education could all be addressed through the same mechanism.  If the right to equity loans is distributed widely throughout the community then small business will be able to compete on an equal footing to large business.


Interest Free Equity Loans requires a government to back the system. The reason is that the decision on where to invest the interest free loans and who is to get the right to such loans is a political decision rather than an economic decision. 

Banks Role in Money Creation

Commercial Banks today create most of the money in circulation in the economy. Almost all the money is created through monetizing existing assets with loans secured against property. When the loans are repaid then the amount of money in circulation reduces in the same way it was created.

If interest free money through selected interest free loans is introduced into the system then the incentive for banks to monetize existing assets to increase the money supply will be reduced. That is, it will become more profitable for banks to lend money they have on deposit and not increase the money supply with any loans. The reason it is more profitable is that banks will take no risk on the money and will only have to ensure that they lend at a higher interest rate than they pay on deposits. The risk of the loans going bad will be taken by the depositors, who may still use the banks to assess the risks, but banks will be paid for those services and not for taking risks themselves.


Banks will also earn fees from the distribution of money generated by no interest loans but again with no risk for the banks on the failure of the equity loans to earn a profit. That risk is taken by the borrowers and for the borrowers it is a lost opportunity cost rather than a direct financial cost.

Government Revenues and Government Infrastructure

Many governments pay a large proportion of their taxes to cover interest payments on infrastructure investments. If governments fund infrastructure with interest free loans they will slowly be relieved of the burden of interest payments. Governments may even choose to pay off debt by issuing their own interest free loans to purchase debt. Interest free loans will not reduce government income but it will make a society that decides to adopt this approach more competitive and no longer reliant on external capital to fund sound investments in its own community. That is it will reduce the need for the Australian economy to borrow money from overseas.


However, it is best if governments themselves do not get interest free loans because there will always be the temptation not to invest in infrastructure but to divert the money to some other purpose.  A better way is to give the interest free loans to the population and let the population invest the money. 


As an example, suppose a government wants to fund the construction of a large water storage dam to increase the availability of water to a community. The government could give interest free loans to its citizens who in turn have to invest the money in the dam.  Rather than simply give all citizens the same amount each citizen could be given an amount that is inversely proportion to the person’s mains water consumption.  This would encourage water conservation and the process could be continued over many years to fund other water saving investments. This process would soon eliminate the need for water restrictions as individuals changed their behaviour to earn water loans.

Costs and Social Outcomes

These systems are inexpensive to implement and could be operational within a few months once the political decision has been made to implement them. The running costs would be less than the cost of existing systems because risk is dispersed and most processes will be automated. 

Costs are minimised because the existing monetary system remains intact and there are no changes to the existing system. This means there is no disruption to commerce.

As well as benefiting small business these systems can be constructed to benefit all individuals in our society. This contrasts with the current financial system which gives great advantage to wealthy people and large business, at the expense of individuals and small business. This comes about because the wealthy and large business have much greater access to loans than the rest of the society.

It does not disadvantage the wealthy or big business but rather it enables everyone to share more equally in new wealth and in the profits from day to day trading.

Emissions Trading Systems: a Webliogr…

Emissions Trading Systems: a Webliography.
“… public policy advances the interests of society most effectively when it is grounded in the best available knowledge.” –  Paul A. T. Higgins (Science in the Policy Process: Rational Decision-Making or Faustian Bargain?   / Bulletin of the American Meteorological Society: May 2008)
 This edition of WWWTools for Education continues to explore responses to evidence of climate change. The theme was introduced in Limits of Computer Modeling: Implications for Government Decisionmaking  (WWWTools for Education: September 07, 2008), and in this edition we present a webliography supporting a greater understanding of Emissions Trading Systems. The next edition in this series will cover the broader range of other mitigation and adaptation strategies being proposed for dealing with climate change.
Terminology.
Most of these words and phrases are becoming increasingly familiar:
ANTHROPOGENIC   (Merriam-Webster) -“of, relating to, or resulting from the influence of human beings on nature“; as in “most of the observed increase in globally averaged temperatures since the mid-twentieth century is very likely due to the observed increase in anthropogenic (man-made) greenhouse gas concentrations”  – Summary for Policymakers  (Intergovernmental Panel on Climate Change) 
CAP-AND-TRADE SYSTEM  – “companies are set an emissions ceiling and must hold sufficient permits to meet that limit. If they exceed the target, they buy permits from businesses that have undershot their quotas.” (Australian Emissions Plan to Compensate Households (Update3) – Gemma Daley : Bloomberg: July 16, 2008)
See also
CARBON CREDITS: Entitlement Certificates issued by the UNFCCC to implementers of approved CDM projects; each represents one tonne of carbon dioxide or equivalent Greenhouse Gas. See Pay Or Get Paid for GHGs  (IIPM: September 26, 2008)
CARBON NEUTRAL: using a CARBON OFFSET to neutralise the CARBON FOOTPRINT of a given action – explained in:
CLEAN COAL: the oxymoron of all time, and probably a phrase that diminishes the credibility of sequestration elements of the debate – a pity, considering the positioning of CCS as a crucial element among solutions.  
What is Clean Coal Technology?   (Sarah Dowdey / HowStuffWorks) gives a general overview of the multiple technologies either in use or under development.
Carbon Capture and Storage from Fossil Fuel Use   (Howard Herzog and Dan Golomb / MIT Laboratory for Energy and the Environment) details the sorts of CCS technology promoted as a prime solution in Australia.
Scientist Casts Doubt over ‘Clean’ Coal  (Sydney Morning Herald: September 26, 2007) – an early reaction to the topic. 
Rudd Defends ‘Clean Coal’ Focus  (Sydney Morning Herald: September 22, 2008) – plan for an Australian CCS research institute.
CLIMATE-SPEAK: 3 phrases from Greenland – “Just a few years ago ...”; “I’ve never seen that before…”; “Well usually … but now I don’t know anymore.” See Learning to Speak Climate  (Thomas L. Friedman / IHT: August 06, 2008)
Climate Change Update.
Now that we have the Garnaut Climate Change Review Final Report, it makes sense to look at its final take on climate change – see especially:
Chapter 2: Understanding climate science
The Report does not attempt to independently evaluate the scientific knowledge relating to climate change. It emphasises the uncertainties inherent in the qualified and contested nature of available scientific evidence, climate sensitivity being the largest of these uncertainties.
It draws extensively on the Fourth Assessment Report of the IPCC, and uses the IPCC definition of climate change.
Chapter 4: Projecting global climate change
 – the importance of maintaining an ambitious mitigation target in order to avoid high-consequence impacts of climate change. Covers:
  • 4.1 How has the climate changed? 
  • 4.2 Understanding climate change projections
  • 4.3 Projected climate change
  • 4.4 Assessing climate risk
Chapter 5: Projecting Australian climate change
 – notwithstanding the unpredictable nature of weather and the difficulty of separating anthropogenic factors from others, this Chapter covers: 
  • 5.2 How climate has changed in Australia, in terms of temperature, rainfall patterns, streamflows, ocean temperatures, the El Niño – Southern Oscillation and Southern Annular Mode phenomena, cyclones and storms, bushfires, and heatwaves.
  • 5.3 Projected climate change in Australia. 

Emissions Update.
Climate Change – Australia  (Emission Statement 2008) – an historical overview from ABS Statistics.
Carbon Emissions on the Rise But Policies Growing Too   (James Russell /  Worldwatch Institute: August 06, 2008) – emphasis on the United States, Europe, India and China; the developing world’s per capita emissions are well below those in industrial countries.
New Report Says Global Carbon Emissions on the Rise despite Reduction Efforts  (Rich Bowden / Tech Herald: September 28, 2008) –  a global four-fold increase in carbon emissions since 2000. See also the Global Carbon Project’s report: Carbon Reductions and Offsets (15 July 2007)
Carbon Trends: an Annual Update of the Global Carbon Budget and Trends  (Global Carbon Project, 2008) – analysis supported by
references, slide presentations, additional emission figures, data files,  and a description of data sources and calculations.
Garnaut Climate Change Review final report, Chapter 3: Emissions in the Platinum Age   – China has overtaken the United States as the world’s largest emitter.
Emissions Trading Systems – Overview Documents.
Emissions Trading   (UNFCCC) – ETS allows countries that have unused emission units to sell excess capacity to countries that have exceeded their targets; commodification of emission reductions or removals; identifies other trading units in the carbon market.
Your Ask the Expert: Carbon Trading   (Abyd Karmali / CNN: October 03, 2008)
Emissions Trading   (Wikipedia)
Market Mechanisms   (International Emissions Trading Association, 2008) – an introduction to emission reduction trading markets.
Linking GHG Emission Trading Schemes and Markets (Jane Ellis and Dennis Tirpak / OECD, October 2006) – sections on different sorts of schemes; glossary of abbreviations.
Inside WCI: Linking   (Eric de Place / Daily Sightline: August 04, 2008) – how different cap and trade programs can coexist.
An Overview of Carbon Markets and Emissions Trading: Lessons for Canada  (Michael R. King / Bank of Canada, 2008) – how emissions trading can mitigate CO2 emissions; key steps in establishing a cap-and-trade system; lessons from the EU Emissions Trading System.
The Garnaut Climate Change Review: Final Report  may be downloaded chapter-by-chapter. See especially:
Perrin Quarles Associates, Inc. to Develop Australia’s Emissions Trading Registry Under the Kyoto Protocol  (MarketWatch: September 26, 2008)
Australian Comment: a Mixed Bag.
Garnaut Backs Broadly Based Australia Carbon Trading (Update3)   (Gemma Daley / Bloomberg: July 04 2008) – trading should start in 2010 with a two-year transition period.
Coming Clean on Climate Change   (Leon Gettler / Age: August 10, 2008) – 48% of Australia’s largest 200 companies will probably suffer severely from climate change; Australian companies are also doing less to address the problem.
Aviation Emissions Plan ‘Too Blunt’  (Peter Veness: news.com: August 20, 2008)
Argus, BHP Chair, Urges Australia to Reconsider Trading Plan   (Gemma Daley / Bloomberg: September 01) – government should consider a carbon tax instead of a cap-and-trade system.
Garnaut Is Wrong, Say Scientists   (Adam Morton / Sydney Morning Herald: September 09, 2008) – call for a more aggressive position.
Carbon Trading Scheme Could Force Transport Prices Up   (John Ferguson / Herald Sun: September 26, 2008) – public transport running on electricity could be more expensive.
Australia Economy Can Afford Emissions Trading: Expert  (Reuters: September 29, 2008)
Global Emissions Agreement Essential: Garnaut   (Emma Rodgers / ABC: September 30, 2008)
Emissions Deal ‘Crucial’ to Economic Future   (Lenore Taylor / Australian: October 01, 2008)
Emissions Cut to Add 37pc to Power Bills   (Lenore Taylor / Australian: October 01, 2008)
Tourism Urged to Get Creative   (TVNZ: October 01, 2008)
Reef Watchers Say Garnaut Half-Right   (Morning Bulletin / October 02, 2008) – corals more resilient than reported.
Roo Industry Backs Climate Change Report   (ABC: October 02, 2008) – should we eat more kangaroo? But see also A Few Roos Loose in Garnaut’s Top Paddock?   (FarmOnline: October 02, 2008)
Economy Won’t Delay Carbon Cut: Wong   (Age: October 02, 2008) – financial crisis should not delay ETS implementation.
MCA Reviews Garnaut Report   (Jessica Darnbrough / Australian Mining: October 02, 2008) – approval from the mining industry.
ETS Initiatives around the World.
NEW ZEALAND:
Climate Change (Emissions Trading and Renewable Preference) Bill (NZ Parliament) –  supported by references to related documents and reports.
New Zealand Emissions Trading Scheme   (Frazer Lindstrom) – detail on the legislation for the introduction of the NZETS, passed September 11, 2008.
Historic Climate Change Legislation Passes in New Zealand   (Government of New Zealand: September 24, 2008)
Emissions Trading Threatens Jobs, Economy, Say Experts  (Diane Cordemans/  Epoch Times: October 01, 2008)
 
EUROPEAN UNION:
Europe Warming Too Quickly  (Alister Doyle / news.com.au: September 29, 2008)
The EU’s Contribution to Shaping A Future Global Climate Change Regime  (European Commission, 2008) – large collection of resources.
The European Union’s Emissions Trading System in Perspective  (A. Denny Ellerman, Paul L. Joskow / Pew Center on Global Climate Change: May 2008) – the world’s first cap-and-trade emissions program; emphasis on its role as a work in progress providing perspective on problems in constructing a global ETS.
See especially Section IV. Controversies, covering issues of windfall profits, the allocation process and over-allocation, volatility of EUA prices, and tlinkage provisions.
European Parliament Votes for Tougher Emissions Targets  (James Kanter / IHT: September 25, 2008)
EU Parliament Panel Backs Plan to Cap Car CO2 in 2012 (Update2)  (Jonathan Stearns / Bloomberg: September 25, 2008) – will apply to all new cars.
EU Parliament Backs Climate Plan  (Quirin Schiermeier / Climate Feedback: October 08, 2008) – from 2013, power stations will not receive free emission allowances; free allowances to manufacturing industries to be phased out by 2020; some concessions to industry.
EU Climate Goals under Pressure As Recession Looms (EurActiv: September 26, 2008) – many useful links at this site.   
Emissions Trading Proves Steep Learning Curve for Airlines  (Kerry Ezard / Flightglobal: September 29, 2008) – compulsory inclusion in the ETS from 2012.
Steelmakers Urge EU to Improve Emissions Proposal  (Reuters: October 02, 2008) – call for balance between ETS and industrial competitiveness.
Emissions Trading in the Netherlands   (Nederlandse Emissieautoriteit, 2006) – concise summary.
Norwegian Emissions Trading System  (ICAO Workshop, Montreal: June 18, 2008) – a slideshow.
NORTH AMERICA:
The Western Climate Initiative   – launched in February 2007: is a collaboration of seven U.S. governors and four Canadian Premiers. Aims to “identify, evaluate and implement collective and cooperative ways to reduce greenhouse gases in the region, focusing on a market-based cap-and-trade system.” 
Developments:
The Regional Greenhouse Gas Initiative – an initiative of the Northeast and Mid-Atlantic States of the U.S; the first mandatory, market-based effort in the U.S. to reduce GHG emissions.
Comment:
Chicago Climate Exchange   – “marketplace for integrating voluntary legally binding emissions reductions with emissions trading and offsets.”
CommentChicago Climate Futures Exchange RGGI Futures and Options Contracts   (Carbon Finance Report: August 20, 2008)
Climate Change Draft Scoping Plan: a Framework for Change: June 2008 Discussion Draft, Pursuant to AB 32, the California Global Warming Solutions Act of 2006  (California Air Resources Board) – “actions designed to reduce overall carbon emissions in California, improve our environment, reduce our dependence on oil, diversify our energy sources, save energy, and enhance public health while creating new jobs and enhancing the growth in California’s economy.” To be considered in November, 2008; measures to be developed and in place by 2012.
Comment:
California Dreaming: Can a Growing State Slash Emissions? (Keith Johnson / Environmental Capital: June 26, 2008)
California Green: State Says Climate Plan Equals Economic Growth (Keith Johnson / Environmental Capital: September 18, 2008)
United States: Weekly Climate Change Policy Update – September 29, 2008 (Kyle Danish, Shelley Fidler, Andrea Hudson Campbell, Kevin Gallagher / Mondaq) – comprehensive summary to date.
The Incidence of U.S. Climate Policy: Where You Stand Depends on Where You Sit  (Dallas Burtraw, Richard Sweeney, Margaret A. Walls / RFF Discussion Paper 08-28, September 2008) – effects of a cap-and-trade program on household costs in 11 regions.
Economic Analyses  (EPA) of the Lieberman-Warner Climate Security Act of 2008 (designed to reduce U.S. greenhouse gas emissions through the development of a market driven system of tradable allowances), and related legislation.
Compensation for Electricity Consumers under a U.S. CO2 Emissions Cap  (Anthony Paul, Dallas Burtraw, Karen Palmer / Resources for the Future: July 19, 2008) – evaluates alternative ways of allocating emission allowances.
ASIA:
Carbon Emissions Scenarios for China to 2100   (Tao Wang,  Jim Watson / Tyndall Centre Working Paper 121, September 2008) – summarises cumulative carbon emissions scenarios for China to 2050 and 2100; explains methodology.
Impact of Revised CO2 Growth Projections for China on Global Stabilization Goals.(Geoffrey Blanford, Richard Richels, Thomas Rutherford / Fondazione Eni Enrico Mattei: September 2008) – models have underestimated the rate of increase in China’s emissions; recalibration of one of those models.
Carbon Trading Warms Up in Tianjin  (Yun Zhang / ALB Legal News: September 26, 2008) – new Tianjin Climate Exchange,  co-founded by the Chicago Climate Exchange. 
Institutional Design for the Emissions Trading System in Japan  (Toru Morotomi / Kyoto Economic Review, Vol. 75, 2006)  – useful background; see especially part 2 Significance and Limitations of the Voluntary Emissions Trading Scheme.
Japan Promotes Carbon Trading, Hybrids   (Ucilia Wang / greentechmedia: July 29, 2008) – plan to reduce the country’s greenhouse emissions by up to 80 percent by 2050.
Policy Issues.
Many of the problems and issues raised by ETS proposals, legislation and implementation are already apparent from readings already cited. Here are a few more that specifically highlight concerns.
BROAD COVERAGE:
Climate Change Policy   (Joshua Gans, speaking at the University of Melbourne / CoreEcon: October 08, 2008) – Australia’s ETS is not a diversified strategy. Need to:
  • cover measurement and political issues by investing in other direct ways of reducing emissions.
  • deal in a price-sensitive manner with trade-exposed industries rather than industry-by-industry.
  • cover innovation directly.
  • seek broader pollution abatement opportunities and target them.
Emissions Trading: The Pros and Cons   (Climate Change Australia: April 08, 2008)
Emissions Trading: The Good, the Bad, and the Ugly  (Gary Patterson / Articlesbase: July 31, 2008)
On a Planet 4c Hotter, All We Can Prepare for Is Extinction (Oliver Tickell / Guardian: August 11, 2008)
Pearse: Ingredients for Another Failed Response  (Guy Pearse / crikey: July 04, 2008)
Equity and Justice in Global Warming Policy. (Snorre Kverndokk and Adam Rose / FEEM Working Papers 80.08, September 2008)
Climate Change Will Probably Beat Us: Garnaut  (Age: June 05, 2008)
COMPENSATION:
Emissions Trading Scheme a Tax, Says Nelson   (AAP: August 02, 2008)
WA Government Must Seek Emissions Trading Compensation at COAG  (UNIONSWA: October 01, 2008)
COMPETITIVENESS:
EU Votes To Tighten Carbon Regulations   (SustainableBusiness.com News: October 08, 2008) – ETS proposals may cause European businesses to lose competitiveness.
Carbon Plan ‘Would Close Businesses’  (AAP: August 21, 2008) – Business Council of Australia warns of company closures and profit downgrades. See also Storm Warning  (Paul Kelly / Australian: August 23, 2008)
Higher Costs Kill Exports   (Alan Oxley / Australian: September 24, 2008)
Wong Promises Emissions Trading Help   (ABC: October 01, 2008)
Emissions Trading Scheme Will Drive Industry Offshore: Warning  (Renee Viellaris / Courier Mail: October 06, 2008) 
CONCERTED GLOBAL RESPONSE REQUIRED:
Light in the Fog   (John Garnaut / Sydney Morning Herald: July 19, 2008)
Delayed Participation of Developing Countries to Climate Agreements: Should Action in the EU and US be Postponed?
(Valentina Bosetti, Carlo Carraro, Massimo Tavoni / Feem Working Paper 70.08, September 2008)
COSTS OF EMISSION REDUCTION:
Treasury Costs ETS   (Lindsay Mitchell / October 06, 2008) – Australia.
Managing Costs in a U.S. Greenhouse Gas Trading Program: A Workshop Summary. (William A. Pizer / RFF Discussion Paper DP-08-23, July 2008)
Task Force Ignores the Cost of Reductions   (JSOnline: August 02, 2008)
ECONOMIC IMPACTS:
State-level Economic Impacts of a National Climate Change Policy  (Martin Ross et al / Pew Center on Global Climate Change: April 2008)
Rudd’s Carbon Scheme Chokes   (Paul Kelly / Australian: August 06, 2008) – “Australia’s emissions trading model cannot work… is misconceived and … will damage Australia’s economy with almost no prospect of solving the global problem.” 
Libs Urge Delay in Emissions Trade  (Cathy Alexander / Canberra Times: October 02, 2008)
EU’s Climate Package ‘in crisis   (Roger Harrabin / BBC News:  October 06, 2008)
EMPLOYMENT: 
Fears Climate Policy to Cost a Million Jobs   (Andrew Fraser / Canberra Times: July 10, 2008)
INTEGRATING THE GLOBAL MARKET:
Just Carbon Emission Trading  (frogblog: October 01, 2008) – harmonising ETS trading on an international market.
JUSTICE:
Charity Warns of Impact of Emissions Scheme   (ABC: September 25, 2008)
Justice and Climate Change   (Eric A. Posner and Cass R. Sunstein / Harvard Project on International Climate Agreements Discussion Paper 08-04, September 2008)
UNCERTAINTY:
Why Are Agricultural Impacts of Climate Change So Uncertain?    (David Lobell and Marshall Burke / Stanford University, 2008)
Garnaut Climate Change Review final report, Chapter 1: A decision-making framework
UNINTENDED CONSEQUENCES:
‘Closure of Power Stations on Cards’   (Rick Wallace / Australian: September 30, 2008)
How the Smart Guys Are Making a Killing out of the Carbon Credits Trade  (Age: August 04, 2008)
Are We Trading Energy Conservation for Toxic Air Emissions?  (Matthew Eckelman, Paul Anastas and Julie Beth Zimmerman / Yale University: October 01, 2008)
Learning Resources.
REFERENCE:
Emissions Trading and Offsets   – lists emissions trading, joint implementation and CDM solutions undertaken by members of The Pew Center’s Business Environmental Leadership Council.
Glossary   (Climate Change North, 2005)
Environmental Glossary  (Singapore Green Business Times: August 01, 2008)
“Cap and Trade.” A Mom’s Simple Definition. (Science Cheerleader)
King’s Global Warming Collection   (King’s College Library, University of Cambridge) – “greenhouse gases, the ozone layer, carbon trading and carbon sequestration, fossil fuels, renewables, nuclear energy, energy storage and distribution, and the hydrogen economy”.
GAMES AND SIMULATIONS:
Climate Challenge   – free online game, won the 2008 European Green IT award. Players guide Europe through the 21st century, making tough choices along the way.
How Greenhouse Gas Emissions Reduction will Affect the American Economy  (Robert Repetto / Yale University, 2007)
Your Carbon Footprint: Calculating, Reducing and Offsetting Your Impact  (TreeHugger, 2008)
BLOGS:
Emissions Trading – newsletter for the emissions market place. including news, prices, links and commentary.
Climate Change Blog   (California Academy of Sciences)
RealClimate: Climate Science from Climate Scientists   – scientific topics only.
Climate Change Australia   – discussion and analysis.
Carbon Offsets Daily   (Affan Laghari) – free resource on all things carbon.
Eco Report   (Sky News Australia)
WEBSITES:
University Corporation for Atmospheric Research
Climate Progress   (Joseph Romm / Center for American Progress Action Fund) – climate science, climate solutions, and climate politics; links to categorised resources in the sidebar.
Climate Change : Environment & Urbanization  (TakingITGlobal)
Global Climate Change: Research Explorer  (The Exploratorium)
Environmental & Energy  (mondaq)
COURSEWARE:
Global Warming   (Virtual Courseware) 
Costs of Climate Protection: A Guide for the Perplexed   (Robert Repetto, Duncan Austin / World Resources Institute, 1997) – MS PowerPoint
SEARCH:
Green Maven   – three tools:
PAPERS AND REPORTS: 
Documents on Emissions Trading   (Environment Directorate, OECD)
Climate Changes   – new research papers on the Economics of Climate Change.
Report Series   (Global Carbon Project)
Lessons from Global Environmental Assessments (M. Kok et al / Netherlands Environmental Assessment Agency, September 2008)
Global Trading versus Linking: Architectures for International Emissions Trading.  (Christian Flachsland, Robert Marschinski and Ottmar Edenhofer / Potsdam Institute for Climate Impact Research, September 2008)
A Lindahl Solution to International Emissions Trading (Yukihiro Nishimura / Queen’s University, August 2008)
On Modeling and Interpreting the Economics of Catastrophic Climate Change  (Martin L. Weitzman / REStat: July 07, 2008)
Future.
100 Months Technical Note   (Victoria Johnson and Andrew Simms / New Economics Foundation) – a dire warning.
Japan Sees Big Firms Trading CO2 Next Year   (Risa Maeda / Reuters: October 08, 2008) – a market for carbon offsets will be launched.
Shell’s Energy Challenge   (Chauncey Robinson / EarthTone Foundation Blog: August 05, 2008)
Aussies ‘prepared to pay to fix climate’   (Sydney Morning Herald: August 30, 2008)
The Influence on Climate Change of Differing Scenarios for Future Development Analyzed Using the MIT Integrated Global System Model  (Ronald Prinn et al / MIT Joint Program on the Science and Policy of Global Change, September 2008)
A Proposal for the Design of the Successor to the Kyoto Protocol. (Larry Karp and Jinhua Zhao / University of California, 2008) 
CSIRO Outline of Climate Change in Australia   – future climate change effects.
Small Sacrifice Can Save the Planet (Marian Wilkinson and Ben Cubby / Sydney Morning Herald: October 01, 2008)
Renewing Our Future  (Amanda McKenzie and Anna Rose / Online Opinion: September 08, 2008)
The Garnaut Climate Change Review: Final Report
The United Nations Climate Change Conference, Poznan, Poland – COP 14:  1-12 December 2008  (United Nations Framework Convention on Climate Change)
Tomgram: John Feffer, The View from 2016   (Tomdispatch.com: August 20, 2008)