About 30% of the world's CO2 emissions now carry an explicit price

the gist

A carbon price puts a cost on each tonne of carbon dioxide emitted, either through a tax or through a cap-and-trade system where companies must hold permits for their emissions. Around 30% of global CO2 emissions are currently covered by some form of carbon price. The idea is that pollution damage, which is usually hidden in what we pay, becomes visible, so cleaner options become more competitive. Coverage and prices vary enormously between systems.

how it works

A carbon tax sets a fixed price per tonne, so firms pay for each unit they emit. Cap-and-trade sets a limit on total emissions and issues permits that can be traded, so the market settles on a price. Either way, cutting emissions becomes a cost saving rather than a pure expense.

so what

Carbon pricing is one of the main tools economists favour for cutting emissions at the lowest cost, because it lets each company find its own cheapest ways to reduce them. Whether it works depends on how high the price is and how widely it applies.

the bigger pattern

The European Union's emissions trading system, launched in 2005, was the first large-scale cap-and-trade market and has since inspired similar schemes in other regions.

D. W. Griffith’s A Corner in Wheat (1909)

the gist

In 1909 D. W. Griffith made a 14-minute film about a speculator who corners the wheat market and doubles the price of bread. A farmer sows his field while a 'Wheat King' gambles in the Chicago wheat pit; bakers raise the loaf from five cents to ten and the poor line up for bread. Griffith cut back and forth between the farm, the feast and the breadline, a technique called parallel editing, so audiences saw both ends of the economy at once. The film drew on Frank Norris's stories and on a real scheme: months earlier Chicago financier James Patten had cornered wheat, sent bread prices up and made about $5 million, roughly $185 million today.

how it works

To corner a market, a trader buys up most of the available supply and the futures contracts that promise more. Anyone who has to deliver the commodity must then buy from the cornerer at whatever price is demanded. The trader profits until the stock is released or the scheme collapses.

so what

A century on, it still shows how markets can be rigged by someone who controls supply, and how the people at either end, farmers and eaters, pay for it. It also helped establish editing as a way to argue a point, not just tell a story.

the bigger pattern

Corners have recurred whenever supply could be locked up, from the Hunt brothers' attempt on silver in 1979 to 1980 to the 'Black Friday' gold panic of 1869. Many such schemes end by collapsing, and the response is often new rules on speculation.

fun fact

In the film the Wheat King dies by falling into a grain elevator and being buried in the wheat he hoarded, an ending borrowed from Norris's novel The Octopus.

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