The Euopean Stock Markets implemented the Carbon Trading Securites structure, based upon the Chicago Exchange's about 2 years ago, I believe.

They have had so much corruption and hedge-fund style activities associated with it, that there are indications it might be suspended.

Even allowing for the relative newness, there has been NO authoritiatve evidence to show that carbon trading has any real effect on the level of emmissions that cannot be accounted for by other measures.

If you want to be serious about reductions, then the only way to do it is to TAX them.

Great article detailing the issues and good tie-in to ENRON. The quasi-religious market-worship and laissez-faire dogma is such nonsense and people need to be inoculated against it's infectious simplistic appeal.

Being a user of ICE, and NYMEX, I've never understood why is regulated and the other is not. I think there might be an argument to be made that electronic trading not be under regulation in the initial stages to spur development. Just as the Govt did with the Internet with regards to taxes. At this point, there is no reason for trades on ICE to play by a different set rules. Consistency in the market is a good thing and is basic premise for the operation of a free market.

While I do think Amarath may have raised the natural gas prices for some consumers, I think that's not necessarily the natural outcome of it's action. If anything if there was better implementation of customer choice in the Natural Gas market, Natural Gas customers could have stood to benefit if they somehow chose gas companies with smarter gas traders than Brian Hunter.

However as things stand, natural gas and electricity is a joke on the retail consumer side. Until consumers in the U.S. understand that they oil/gas/electrcity are not inalienable right and need, and they have choices in both what they consume and who them consume from, the U.S. will continue to have problems with these resources.

those lessons will be ignored.

And, Princeprigio, since when does a "consumer" have a choice about where to get gas and electricity? I live in Los Angeles, we get our water and power from the Department of Water and Power, and our gas from the Gas Company. There are no other choices. We pay what they say, and have no opportunity to take our business elsewhere. And don't hand me that line about how energy is not an inalienable right, that I can choose not to use energy. That's a load of crap and you know it. Plus, it disrespects intelligence.

Am I correct in my recollection that Cantor Fitzgerald played a major part in Enron's trading activities before C-F relocated from WTC?

Granted, it's hard to generate sympathy for hedge fund traders and analysts, but the folks who worked at Amaranth, who traded other sectors, who may not have done anything wrong at all, will get no bonus, possibly no salary (depending on how hedge fund traders's compensation works) because of Brian Hunter's blowing up of the whole company. Yet another example of a market failure.

As for the retail energy consumers, in NY and other NorthEastern states, there's retail choice. You can choose who supplies energy that your local electric utility delivers to your house. But you know, it's really depressing when you realize that the suppliers are all charging roughly the same cost-- so your 'choice' is illusory, at best.

All the suppliers are affected by the commodity prices (which are affected by regular supply and demand, as well as supply shocks from Katrina, and disturbances from blowups like Amaranth) and they're all trying to make money, so you're really not getting any great deals as an end-user.

For people who live in non-deregulated states, where your local utility company that owns all the power lines also owns all the generators and handles the supply, you get no choice AT ALL.

So, unless we all want to crank back our living standards, and live like the Amish do, it's not realistic to blame commodity prices on the retail end-user.

And it's a very good thing...

The Euro market for carbon credits is already a dysfunctional speculative joke. It won't get any better if this type of market is expanded.

At least, after a dozen hedge funds or two or three major banks flounder, we'll get the right mechanism : a carbon tax.

The crash cannot come early enough.

What's the Wall Street proverb? "Bulls make money, bears make money, hogs get slaughtered." Amaranth was a slaughtered hog. Boo-f'n-hoo.

The idea that Amaranth's impact on demand for gas and therefore on the price of gas, is a "market failure" doesn't pass muster. Amaranth helped increase demand, prices went up. That's what markets do. That Amaranth's demand was speculative in nature is beside the point. The price of gold and platinum for medical and industrial uses is driven up by the demand for those metals for ornamental uses. Maybe I don't consider that a "legitimate" demand factor -- but it remains a demand factor in the market. The nature of the demand is not part of the equation. Markets don't distinguish between "legitimate" and "illegitimate" demand. That's not the function of a market.

Fiascos such as Enron aren't a result of lack of regulation any more than a kid stealing cotton candy is a result of having insufficient laws against petty thievery. The best reform would be one that helps make publicly traded companies' internal books more transparent to investors in real time. Unfortunately, much of our regulatory emphasis tends toward making things less transparent rather than more transparent.

Andrew Leonard writes: "The temptation to game and manipulate such markets will be irresistible. The responsibility of governments to regulate will be immense."

I wonder if you have considered the possibility that regulating a complex market, such as those associated with the exchange of commodities, in the public interest is not possible, even if regulators are wise and well-intentioned?

http://economics.gmu.edu/pboettke/workshop/fall06/Friedman%202005.pdf