Thursday 7 April 2011

Why carbon trading may not be necessary

OK, this is where I take a big risk and predict the impact of oil prices on the need for carbon trading.  My take on carbon trading is that if the price of oil is high enough then carbon trading isn't needed.  I'd put this price at $200 a barrel.  Today, Brent crude is at $122, not so far off the record peak in July 2008 of $145.  The high price will push industry, nations and individuals into adopting low energy solutions and renewables that suddenly make a lot of sense as the return on investment drops down to 5 years - I'd suggest this is the point at which consumers have a horizon on financial decisions (apart from buying a home).  What drives the price up?  Well, in the short terms problems in the Middle East.  But demand is growing ahead of production rates.  Additionally, the discovery of new oil reserves has been falling dramatically.  Peak oil is the point at which the maximum rate of global oil production has been reached, and it is followed by a decline.  The International Energy Agency says this happened in 2006.  Scarcity is essential to keep the world moving towards renewables.  Renewables will cause the oil price to fall as demand drops off; scarcity helps redress this.

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