This is the second part of the previous article on APM and hopefully, it helps to build a foundation for creating a global framework toward a carbon capital markets regime. This financial underpinning in America’s institutions includes taxing, platform placement, suppliers, and beneficiaries. I’m very happy and optimistic about the future of the planet but especially as I see the U.S.’s role in creating this beautiful reality. Once carbon is securitized and traded in terms of a commodity instead of the fatalism of the Climate Question will become more positive. It will shift to market-based long-term planning in terms of manufacturing than a short-term emotional politically deceived debate.
I had a tough couple of weeks of wondering how to even address the problem and where the look to begin with. I went back to the source of the previous article and I began to say “Hey, the best way to start is the basis of the article. CARBON CARBON CCCAAARRBBBOOONNNN! So to begin how about the measurement should be at the atomic level. Let’s start by measuring the amount carbon in a barrel of crude oil.”
I’m not a scientist or have a deep understanding of the science so I stumbled on a great blog by Jim Bliss on Carbon measurement. His blog post helped clarify how to begin developing a globally acceptable thus traded market. He broke down what is lost on the carbon debate which I argue should be put on the CME trading market. When you begin to measure on the atomic level it really helps to craft an understanding of the issue. You need to see how they also begin to add to your thinking that the US and the World have different standards of measuring which causes uncertainty in the markets, particularly with the C-Suite. Read the citation on the blog post below to understand why the industry fights this but this should help answer.
1 litre: 2.331kg of CO2
1 US gallon: 8.824kg of CO2
1 litre: 2.772kg of CO2
1 US gallon: 10.493kg of CO2
1 barrel: 317kg of CO2 (min.)
1 TONNE OF CO2 IS:
429 litres / 113.33 gal of petrol*
360.75 litres / 95.3 gal of diesel
3.15 barrels of crude oil
* less than 8 fills of an average-sized car with a 55 litre tank
1. Gasoline: 44.1% (70.12 litres)
2. Distillate fuel oil: 20.8% (33.07 litres)
3. Kerosene-type jet fuel: 9.3% (14.79 litres)
4. Residual fuel oil: 5.2% (8.27 litres)**
All of the other products*** of refined crude have sufficient alternative uses to make it possible (even if not entirely probable) that they will not end up as atmospheric CO2. Of the four grades of fuel listed above, however, it’s fair to say all of it is destined to be burnt. It’s worth noting, therefore, that our final result will represent a minimum CO2 per barrel.
Now, the litre values are no good to us by themselves. Each of the fuels has a different specific gravity (a different weight per litre), and it’s the weight of carbon we’re looking for, not the volume. Once we’ve multiplied the volume of each fuel by the relevant specific gravity we’ll have a rough “kilogram per barrel” number for each fuel. So:
1. Gasoline: 70.12 litres x 0.74 = 51.89kg
2. Distillate fuel oil: 33.07 litres x 0.88 = 29.10kg
3. Kerosene-type jet fuel: 14.79 litres x 0.82 = 12.13kg
4. Residual fuel oil: 8.27 litres x 0.92 = 7.61kg****
Overall, this suggests that the average barrel of crude refined in the United States in 1995 yielded a shade over 100kg of liquid fuels (that’s an uncannily round number… 100.73kg to be exact). Now, we know that a carbon-based fuel will emit 3.15 times its own weight in CO2 when burnt.
Bliss, Jim. “Carbon dioxide emissions per barrel of crude.” The Quiet Road, http://numero57.net/2008/03/20/carbon-dioxide-emissions-per-barrel-of-crude/
This was great and I wanted to post a previous post by him:
“I then took that 317kg (which was the primary goal of my work, as it’s a useful reference figure) and applied it to a specific real-world project. In this case, the Peterhead / Miller Field carbon capture scheme proposed by BP. According to the BP press release:
Injecting the carbon dioxide into the Miller Field reservoir more than three kilometers under the seabed could extend the life of the field by about 20 years and enable additional production of about 40 million barrels of oil that are not currently recoverable.BP | Industrial-scale decarbonized fuels project
And in the following paragraph:
The project would also permanently store 1.3 million tonnes of carbon dioxide, the equivalent of removing 300,000 cars from the roads.
Based upon these figures, provided by BP, it is clear that the 40 million barrels of oil will generate (multiply by 317kg) approximately 12.68 million tonnes of CO2. Which clearly dwarfs the 1.3 million tonnes that BP claims will be stored.”
Bliss, Jim. “Oil Companies and Climate Change Redux..” The Quiet Road, http://numero57.net/2008/03/20/oil-companies-and-climate-change-redux/
Now we got something to look at with a figure to start: 317kg of CO2. Now we could say that a “Barrel” of carbon is equivalent to the above measurement and with the push in the globe into carbon capture. With CCS (Carbon Capture and Sequestration) technology it can be a commodity like wood, titanium, steel, and of course Oil. Now industries on both sides of the Atlantic could adjust and make long-term business planning now that carbon will not be a politically no-winner causing backlash.
Now the premise of the article which could have a stabilizing effect on the market is the creation of the WTI/Brent Oil and Carbon Index.
1 barrel of crude oil is: 42 gallons/158.987 liters
1 barrel of carbon is: 317kg of CO2
Now we could get into the breakdown of the difference between the WTI vs Brent price index. The security of the US market vs the Brent which includes the Middle East, European, and African oil producers, which are usually state players. If you are watching the news right now then you’ll understand why the brent is high because of the major geopolitically headwinds in the world. WTI will always be a secure source of oil/carbon because it is in the Continental US and the Americas. Brent has a range of security issues which is always a security dilemma for the US which in turn must use its military in order to keep the free flow of the world’s energy.
If you attach the oil and carbon intertwined simultaneously it could help with first the price which a trader can buy and then the option is there for an Oil prime (Carbon included) or Oil sweet (Carbon Excluded) contract. The trader, institution, or Major Carbon emitters can buy the contracts with the tax plan that the Hamilton Institute is calling for it. Is included and used to CCS, advance technology to pull the carbon out of the atmosphere to be manufactured into products, and advance America’s economic, scientific, and military might.
This is completely different from the carbon credit regime in place where a contract is bought and later sold for profit. This proposal that is laid out is completely different than the latter. This version calls for carbon to be put into the financial markets and used in the taxation and allocation in the Western Economy.
“Let’s roll” – Todd Beamer
343 – The number of firefighters killed on 9/11.
Founding Purpose: “We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity.”
The mechanism for achieving this goal is Capitalism and Democracy