Daily Archives: August 8, 2010

A Great Argument for Carbon Taxes (and Credits)

A recent article in Knowledge @ Wharton Universia on phishing, bribery, and falsification: combating the complexities of carbon fraud provides a great argument on why cap and trade should be abandoned in favour of straight carbon taxes (and credits if the goal is to encourage corporations to be as efficient with carbon emissions as possible). According to the article, carbon trading systems, especially when coupled with lax Internet security and third party verification, pose a great opportunity for crooks who want to defraud honest companies out of millions of dollars.

The first example the article gave was of a group of rouge traders who, earlier this year, stole as much as $4 Million by posing as regulators, setting up a fake, but official-looking website, and using it to obtain carbon trading account information from companies and traders who thought they were complying with government requests. The scheme forced the German Emissions Trade Authority to suspend trading, but not before 250,000 permits had been stolen.

The second example was that of Carbon Harvesting Corp who’s director has been arrested and charged in connection in an alleged scheme to pay $2.5 Million to “rent” a fifth of Liberia’s forests and profit by selling the credits that could be obtained from the carbon absorbing trees.

All in all, Europol estimated that tax fraud associated with carbon trading reached 6.5 Billion over 18 months, and in some countries, up to 90% of trading volume resulted from fraudulent activities. A recent report on Ten Ways to Game the Carbon Market identified 10 scams common to carbon trading … and the list was not necessarily all-inclusive.

But if there’s no trading, there’s no opportunity for trading fraud. And there’s no need for trading if governments simply levy a tax on every tonne of carbon emitted. Furthermore, if the goal is to compensate companies that are being extra efficient about carbon emission, there can also be carbon credits where companies that emit below a floor can get tax credits. In fact, it only takes a simple algebraic formula to capture taxes and credits in a joint system: (tons emitted - tons allowed) * tax per ton. For example, if it’s $10 per tonne, the company has an allowance of 1,000 tons, and the company emits 2,000 tons, then the company would pay (2,000-1,000)*10 = 10,000. And if it’s $10 per tonne, the company has an allowance of 1,000 tons, and the company emits 500 tons, then the company would get a credit of (500-1,000)*10 = 5,000 on its tax return. Simple.

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Should the US Insource It’s Nutrition and Health Care from India?

I loathe saying it, but I think the US should import India’s bright entrepreneurs and their organizations to manage it’s healthcare and nutritional programs.

In the US, 31% (or 1 out of 3) of people are obese (which is defined as 30 pounds or more above a healthy weight range) and 65% of people (or 2 out of 3) are either overweight (at least 10 pounds above a healthy weight range) or obese. Current projections put obesity at 40% (or 2 out of 5) within 5 years. And these statistics are almost as bad for children as they are for adults! (And you can’t blame TV and lack of physical activity. Nutrition and diet has a greater effect on weight than exercise, which has a greater effect on overall health and stamina. The problem is that the average American consumes too much sugar. The Bitter Truth is that variants of bad sugar are in everything these days.)

Part of the problem is the US school lunch program, and its insufficient funding, which leads to purchases of cheaper, junk foods (including processed chicken nuggets, etc.) in place of more expensive, healthier foods. And while the Improving Nutrition for America’s Children Act seems like a good start, you just know that most of the additional funding will get eaten up in administration costs. (And even if this doesn’t happen, I have to agree with Gordon Jenkins that the funding being allocated just isn’t enough.)

Then there’s the state of healthcare in the US, which is dismal if you don’t have pricey private insurance, and still over priced if you do. In fact, despite the fact that the USA leads in GDP, and should lead in healthcare innovation, the World Health Organization has it’s health care system ranked at 37! To put this in perspective, Costa Rica is 36, Saudi Arabia is 26, and Oman is 8 — which are not countries your average American would think of as ranking high in health care.

In comparison, India has the 1,000 bed Narayana Hrudayalaya Hospital with a team of 40+ cardiologists who perform about 600 operations a week for an average charge of $2,000 — at a success rate that rivals the best American hospitals. By employing Henry Ford’s management principles to create a combination of economies of scale and specialization, Devi Shetty has developed a system that can drastically reduce the cost of surgery. If the principles were applied to other areas of medicine, imagine the efficiencies, cost savings, and success rates that could be achieved. (After all, now that hospitals are starting to use before-and-after surgical checklists, success rates are soaring and infection rates plummeting.)

And while that’s impressive, what Akshaya Patra is managing to do is even more stunning! For a mere $28 each, they are managing to provide over 1.2 Million children in school with a healthy lunch (which might be the only complete meal they get that day) every day for the entire school year. By leveraging appropriate technology in cooking and delivery, local markets, and designing for scalability, the public/private/NGO partnership is achieving economies of scale that have not been achieved before — and proving that a healthy student is a successful student. The increased quality of the lunches provided have led to increased enrolment, better health, and improved performance (that is 13.8% better, on average, for boys and 34.2% better, on average, for girls).

Compared to India’s success, the US looks like a third world country. Maybe the US should be insourcing from India.

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