As the development of economics, more and more people can afford buying cars. And the congestion issue becomes more serious in some populous area. And the congestion contributes a lot to bad air condition. In terms of traffic congestion, I have to mention Beijing. It has large population and huge number of cars. Locals complain the traffic jam a lot. Also, Beijing Provincial government came up many ideas to relieve the traffic jam from 2007. The motivation is to prepare the Olympic Game held in 2008. And the officials revised it every year.

The two main methods are to restrict cars number and encourage public transportation utilization.

1.Restriction on Car Numbers

(a) Odd-and-even License Plate Rule

From 2007, April, car with odd number license was only allowed to use on odd days of month.  The even is allowed on even days of month. Some rich would buy two cars with odd and even license respectively. The congestion situation was not much better.

Everyday, cars would be banned to use, with 2 particular numbers in 2011. The numbers are 3 and 8, 4 and 9, 5 and 0, 1 and 6, 2 and 7 on Monday to Friday, respectively. Every number will be banned once a week. It still makes no trouble for the rich with two cars unless the licenses are banned in the same days simultaneously.

Then the regulation was moderated in 2012, April. The numbers banned every day will be changed every 13 months. It still makes no any inconvenient for the rich, with more than two cars, unless the licenses are banned in the same days simultaneously.

(b) Ban on Nonlocal Cars in Rush Hour

During 7-9 a.m. and 5-7 p.m., the nonlocal cars are not allowed to appear on road. With violation, the drives will be fined for $100. It makes the locals convenient to go to work and home timely. But the nonlocal cars have to wait.

For the drivers who came from other places, it impacts a lot. They even have to eat dinner until 9 p.m.. The nonlocals have to arrange their time in advance before they start off to Beijing. As for some rich nonlocals, they buy cars in Beijing with high price. Then the car can be equipped with Beijing local license.

(c) Regulation on Car Number Property Right

Not any one can get car license after application. The government permits the application by the method of random sampling in 2011, January. It is only 10% to get the permission. Some people get the permission after random sampling, who would transfer it in high price to the rich. And there are many scandals of corruptions. Many auto stores can sell car licenses if you can afford.

(d) Regulation on Secondhand Car Transaction

Some poor people came up with the idea to buy secondhand car due to the difficulty to get one car license. But it was regulated in 2012. Anyone who want transfer car to consumer need get the permission of government. It is possible to breed corruption. It is more and more difficult to get car license in Beijing for the poor.

2. Encouragement on utilization of public transportation

(a) Subsidy on Public Transportation Ticket Fees

The tickets are cheap in Beijing for public transportations (bus, subway ,etc.), in comparison. Because the government subsidizes the public transportation a lot from 2007. The bus ticket only costs $0.06 and for subway, it is only $0.3.

For the poor, who has to use public transportation everyday, it is really a bonus. For the rich, they don not care it.

(b) Special Road Lane

The lanes can only be used by buses. Otherwise, the cars will be fined to use the special lane for buses. When the jam happens, the buses can still not be stacked in. This policy announced in 2007, still effects now. So, more people would choose to use buses in cases of traffic jam.

This policy influences both the poor and the rich, the locals and the nonlocals positively.

Although there are such many regulations to mitigate the traffic congestion, the situation does not change much better. Because the number of car still be increasing to 5,000,000, due to the huge population (20,000,000), the high affordability for cars and government corruptions in Beijing. But without these regulations, the situation will become worse and worse.

German Effluent Water Tax

Intensive sectors (such as energy, chemicals, and construction) in the post-war period caused serious environmental problems as the construction of wastewater treatment facilities did not keep pace. Compared to other industrial nations, such as the UK and Japan, Germany did not have the option to dispose wastewater from its industrial areas directly to the sea, which led to highly polluted river systems. A future acceptable water supply would have been under a serious threat in German.

The effluent charge was introduced in 1976 as a reaction to the insufficient implementation of direct regulation. Innovatively, German combined three regulations following together.

The policy mix consists of the following instruments:

• Discharge Permits (Federal Water Act, implemented in 1957)

• Effluent Tax (Effluent Tax Act; implemented in 1976)

• Discharge limits and technological standards (Waste Water Ordinance implemented in 1997)

All discharges of effluent require a permit. This permit is issued only if the effluent to be discharged is kept as low as possible for the required process and with the best available technology. In 2004, the emission-related requirements, such as pollutants limits and technical standards, were further specified for 57 areas of origin and production sectors by enforcing the Waste Water Ordinance. Permits can be granted temporarily or permanently and can be withdrawn if concerns regarding water protection and management arise.

The effluent tax is based on these permits, rather than on actual measurements. The tax rate is based on damage units, which are calculated as the equivalents of pollutants in the discharged effluent. Measured pollutants include phosphorous, nitrogen, organic halogen, mercury, cadmium, chromate, nickel, lead, copper, and indicators on the chemical oxygen demand and the toxicity for fish eggs.

The effluent tax implement the “polluter pays principle”, ,leading to the internalization of external costs. The effluent tax shall provide an economic incentive to avoid or reduce harmful effluent discharges. The revenue of the effluent tax is used for investments in water quality programs by the Länder, such as the construction of municipal sewage treatment and the administration of water quality programs tax’s incentive effect in improving water quality. As a consequence, the costs to mitigate, eliminate, and balance damage to water bodies were distributed among the polluters, which reflects a successful implementation of the polluter pays principle.

The policy mix consisting of regulatory and economic instruments can be very powerful in implementing and enforcing policies to address direct effluent emissions. Obviously, goods results have been achieved in terms of environmental outcomes due to the policy mix.

However, personally, it has shown the importance of creating the right incentive structure to achieve the targeted objectives -it was found that the effluent tax rate has been set too low since its introduction in 1979. In addition, the effluent tax rate has not been adjusted to inflation. In this case, I do not believe tax is approximately equal to the marginal damage from the pollutant, as times goes. As the cost of measures for abatement have increased with inflation, and standard become more strict, the effluent tax could not develop its full potential for setting innovation incentives to abate residual pollution.

Reference:http://www.ecologic.eu/files/attachments/Publications/2012/effluent_tax.pdf

Airlines Are Allocated by Carbon Permits in EU

Air travel accounts for perhaps 3 to 5% of global carbon dioxide emissions, far below sources like deforestation, coal-fired electricity and automobiles. It is really no immediate alternative to carbon-intensive jet fuel. Airlines have experimented with biofuel mixes, but they’re still a long way from regular use.

Starting 2012, the E.U. set to extend its Emissions Trading System to the air travel industry, which means that airlines would need to account for the carbon emitted for the entirety of any flight that takes off from or lands at any airport in Europe. Airlines would be allocated carbon permits—most of which would be free initially—but would have to buy additional credits on the carbon market if their emissions exceed those allowances. It would be the first meaningful attempt to constrain the carbon emissions from air travel.

The EU is also looking at ways to regulate the carbon output of international shipping. Proposals to curb greenhouse gas emissions from aviation and shipping have been under discussion since the negotiations leading up to the Kyoto protocol in 1997, and in recent years have focused on a levy on shipping. But that proposal was knocked back yet again at this month’s UN climate negotiations in Durban, South Africa. Emissions from international aviation and maritime transport are excluded from the Kyoto protocol and the 2009 Copenhagen accord, and there is no guarantee they will be included in any new international climate agreement to come into force from 2020. If aviation is included in the EU emissions trading scheme, it will be the first time carbon emissions from the sector have been regulated.

While the industry has said the new rules could cost billions—money that you can bet will be passed to passengers. The European Commission estimates that the price per passenger would range from $1.40 to $8.60 per ticket, depending on the length of the flight. From this prospective, this method can not limit the emission to an ideal level, because the cost can be transferred to customers by high ticket price. The emission could be deducted by a relatively small number.

In my opinion, the carbon permits function as quota, which can limit the emission at a point that can maximize the social benefits. If the emission exceeds the allowances, they have to pay cost to buy the additional credits. The cost shifts down the supply curve, suppressing the supply. The cost can be used to deal with environmental problems. It is effective to reduce the use of traditional jet fuels by find an environmental friendly alternatives.

Reference: http://science.time.com/2011/12/20/air-war-u-s-and-europe-clash-over-proposed-carbon-fees-for-airlines/

http://www.guardian.co.uk/environment/2011/dec/20/eu-charge-airlines-carbon-emissions?newsfeed=true

Policy Analysis—- Regulation on biodiesel

To promote the sale of biofuels, the federal government and several states offer excise tax credits for biofuel blends. Domestically produced ethanol, for example, receives a 51cents per gallon federal subsidy.

On September 1, 2010, the government of Canada announced the finalization of Federal Renewable Fuel Regulations requiring an average of 5% renewable content in gasoline across Canada. This Renewable Fuel Mandate came into effect on December 15th, 2010. In addition, the Government of Canada announced a July 1, 2011 start date for an average 2% renewable fuel content in diesel fuel and heating distillate oil with the compliance period ending December 31, 2012.

Biodiesel can be blended with ordinary diesel fuel at any concentration. Most diesel vehicles can run on blends of up to 20 percent with few or no modifications, and a few engine warrantees allow for use of100-per-cent biodiesel. More than 600 vehicle fleets, ranging from school buses to National Park Service vehicles, now use biodiesel. The U.S. Navy, the largest diesel user in the world, has begun processing its used cooking oil into cleaner-burning biodiesel.

Biofuels have the potential to reduce many environmental problems associated with transportation. By the way,because the raw material of biofuel mostly comes from vegetable oils.  So this regulation promotes vegetable oils production and better environment.

The fiscal cliff will give a negative influence on future market. I will offset my long contracts of soybeans as soon as possible.

I will not go short contracts of corn next week,because the Environmental Protection Agency has rejected requests from several governors — including Virginia’s — to waive fuel standards that require more corn to go toward making ethanol.The renewable fuels law will require production of 15 billion gallons of ethanol by 2015, up from 13.2 billion gallons this year.That will require an increasing amount of corn, which is used in making ethanol. That’s great for corn producers, who are seeing their crops’ prices go up, but bad for other farmers — like poultry and swine farmers — who are watching feed prices go up as well. There is an conflcting indicators in corn markets. It is hard to make a prediction.

In compairson, it is easy to make a prediction in soybean markets. The soybean price is predicted to fall in the next week because of the strong sign of fiscal cliff.

I will go short of soybean next week.

Chicago Board of Trade (CBOT) soybean futures ended lower on Thursday suspended for two days in a row of gains. Investors offset long positions due to “financial cliff” worries and good weather conditions inSouth America. Agricultural market price and theU.S.stock market all fell, the financial investors worried that cliff would not be resolved, theU.S.economy may be in recession.

 The term “financial cliff” , was first proposed by Federal Reserve Chairman Ben Bernanke at a congressional hearing in February 2012 .It refers to the series of increasing income and reducing expenses fiscal policy will fail at the same time ,January 1, 2013, according to the current law in theUnited States. Once these policies are triggered to occur, the United States 2013 federal austerity will reach about 600 billion U.S. dollars, accounting for 4% of GDP. This huge fiscal tightening may directly pushing theU.S.economy down tor cliff recession.Fiscal policy mainly refers to the 2001 to 2003 tax cuts, the alternative minimum tax rate (AMT), wage tax credits, automatic spending cuts mechanisms, emergency unemployment relief bill, the Affordable Care Act (Affordable Care Act, ACA)

The ” financial cliff  cause a direct recession of the U.S. economy,as well as,financial cliff ” cause a negative spillover effect,which will spread to the United States at the same time and international market.Firstly, the “financial cliff” caused  uncertainty which depressing market confidence, suppressing corporate capital spending and private consumption.  Finally, the negative impact of the “financial cliff” to the U.S. economy transfer to the other countries through trade, financial markets and other channels.

It is predicted a recession in future markets.

Ending balance as of 11-16-2012,

        Position Value:  $2700.00

        Cash Available:  $42857.69

        Equity:         $45557.69

        Realized Gains:  $6918.00

This week I do an experiment, proving that even though the information gives a sign of unbelievable continuing fall, the price trend are the same as the information shock. It is a failure to guess the market trend by the common sense that the price is predicted to increase after a big fall. It is not kidding to analysis and collect information before investment, otherwise, an imprudent guess can lead to big loss.

I bought two contract of soybean, against the information sign of the increasing production by USDA report. I guess the price will increase after two weeks’ fall. But I lost $2069 in a week. How important to abide with the investment rules about the negative influence of supply increase and currency depreciation.

Chicago Board of Trade (CBOT) soybean futures ended lower on Thursday suspended for two days in a row of gains. Investors offset long positions due to “financial cliff” worries and good weather conditions inSouth America. Agricultural market price and theU.S.stock market all fell, the financial investors worried that cliff would not be resolved, theU.S.economy may be in recession.

I ignore such an important news about fiscal cliff.

For the most part, today’s USDA reports were negative for crop prices–more so for soybeans and less for corn and wheat. Corn prices are expected to remain in the sideways pattern experienced over the past six weeks while old crop wheat prices are expected to be supported within the wide range experienced since mid-July. Prices for the 2013 wheat crop are expected to remain strong based on production concerns. Soybean prices are in a clear downtrend, with some chance that South American production risk is now being under-valued. 

The soybean market will now be influenced by the on-going rate of consumption, particularly the pace of exports. Some recent sales cancellations reflect the substantial price decline since early September and prospects for a large South American crop. Development of that crop will now become center stage.The Crop Production and Grain Stocks reports to be released on January 11 will be closely watched for changes in the production forecast, with some change in the forecast of harvested acreage expected, and for the revealed rate of domestic feed and residual use of corn.

The USDA report will give an neggative indicators on market prcie increasing. I will continue go short of soybean and corn.

The USDA report is released this week,which rises the estimation of production.

The 2012 U.S. soybean crop is forecast at 2.971 billion bushels, 111 million larger than the October forecast and 80 million larger than the average trade guess. The U.S. average yield is forecast at 39.3 bushels, 1.1 bushels above the average trade guess, 1.5 bushels above the October forecast, and only 1.6 bushels below last year’s average. The average yield forecast was increased for all but seven states, with only the yield in Oklahoma reduced from that of a month ago. Outside the U.S., production forecasts were increased slightly for Bolivia and the Ukraine.

The forecast of U.S. soybean exports was increased by 80 million bushels, the forecast of the domestic crush was increased by 20 million bushels, and the forecast of ending stocks was increased by 10 million bushels. The projection of world stocks was increased by 90 million bushels (4.3 percent). The 2012-13 marketing year average price farm is expected to be in a range of $13.90 to $15.90, $0.35 below the October forecast.

The soybean market will now be influenced by the on-going rate of consumption, particularly the pace of exports. Some recent sales cancellations reflect the substantial price decline since early September and prospects for a large South American crop. Development of that crop will now become center stage.

The 2012 U.S. corn crop is forecast at 10.725 billion bushels, 19 million bushels larger than the October forecast. The U.S. average corn yield is forecast at 122.3 bushels, 0.3 bushels larger than the October forecast. The production forecast for the rest of the world was a fraction higher than the October forecast, with smaller forecasts for Europe and Mexico, offset by slightly larger forecasts for Southeast Asia and Russia.

Consumption of U.S. corn during the current marketing year is projected at 11.167 billion bushels, 17 million larger than the October forecast, reflecting an increase in the expected consumption for food and industrial purposes. However, the projection of imports was increased by 25 million bushels, to a total of 100 million bushels, so that the projection of ending stocks was increased by 28 million bushels.

Ending stocks for both the U.S. and the world are expected to be much smaller than stocks at the beginning of the marketing year. The marketing year average farm price is now projected in a range of $6.95 to $8.25, $0.25 lower than the October projection.

New projections differed from market expectations in several aspects. U.S. production is larger than expected, the forecast of the Argentine crop was not reduced as some thought might happen, and the projection of year ending stocks exceeds expectations. The corn market will now be influenced by the development of the South American crop, with emphasis on weather conditions in Argentina following an extremely wet October, and the ongoing rate of consumption, particularly the pace of exports.

The Crop Production and Grain Stocks reports to be released on January 11 will be closely watched for changes in the production forecast, with some change in the forecast of harvested acreage expected, and for the revealed rate of domestic feed and residual use of corn.

reference website http://www.agweb.com/news.aspx

                                    http://www.cmegroup.com/

This week, I went a short contract of corn and a short contract of soybean. I gain a lot in soybean, almost gain 100%.Additionaly,I gain a little in corn market, because of the soybean decreasing pressure.

I can gain a lot because many reasons. Gradually, I find that the future price is easy to be predicted. If the information is carefully be collected and analyzed, the trend is obvious for the hedger.

Last week, I mentioned in one of my blogs, U.S. dollar appreciated, weakening the consume power in the market, then the price was expected to decrease. And, two big companies released the information about the rise estimation of production and exportation. Many information indicated the trend would be downwards.

As we all know the corn and soybean is substitution, the trend of future market is almost same. So I often went the same contract in the two markets. It proved that the soybean market price influence negatively the corn price.

I often went 1or 2 contracts because I am afraid of high risk. But the risk-avoiding behavior make little gain as well. I am not confident about my analysis and prediction. If I make a good preparation, the trend of future market is almost the same as my prediction. These 8 weeks trade prove that.       

Beginning balance from 11-08-2012,

        Position Value: $7330.00

        Cash Available: $34741.35

        Equity:         $42071.35

        Realized Gains: $445.00

—————————————-

Paying interest of $0.05

Holding 6 – short on S2X                  mark to market

        price in:       1532.00

        today’s price:  1452.00

        committed:      $4625.00

        gain/loss:      $4000.00

Holding 7 – short on C2Z                  mark to market

        price in:       741.00

        today’s price:  738.75

        committed:      $1080.00

        gain/loss:      $112.50