Wall Street And Climate Change Get Cosier And Cosier…
A couple of interesting news from Wall Street this week in the realm of carbon finance. Firstly, on Tuesday, JP Morgan announced the launch of what is, as far as I can tell, the first ever bond index with a special climate change risk overlay. In the interest of disclosure, I was tangentially involved with this project. While this overlay probably won't have much of an impact in the very near term, it will be interesting to see what happens once constituent firms are all subjected to some form of greenhouse gas regulation. Second, on Thursday, Lehman...
Linking Emissions Trading Systems
For those interested in the topic of emissions trading, a new piece was just published by the International Emissions Trading Association on the topic of 'linking' different emissions trading regimes (PDF document). Linking entails allowing emission credits from one scheme to be rendered tradable in another. For example, European credits would be valid and tradable in California, and vice-versa. Beyond allowing the carbon market to become more efficient and liquid, linking could also present a range of arbitrage opportunities. For all of you environmental markets fiends out there, I would definitely recommend this paper. It's short (13...
Dead Wrong On Climate Exchange
In a May 8 post I opined that, although I believed that recent developments on the climate change file in the US would bode well for Climate Exchange plc (CXCHF.PK), I thought that the stock was overpriced and had had too great a run for its own good over the past 3 months. I therefore predicted that the next move the stock would make would be to the downside. Climate Exchange was trading at around $28 then, and today it is trading in the neighborhood of $36. I continue to believe that this stock is going way too...
Competition In Environmental Markets Heats Up
Close followers of the environmental finance space have known it for a while; Climate Exchange (CXCHF.PK or CLE.L) is sitting on a potential gold mine. The market for environmental commodities, but especially carbon emissions, is slated to grow significantly over the next 5 to 7 years. It was therefore only a matter of time before competition sprung up, both from small players trying to leverage their technological platforms and from the big guys. The big guys came out swinging this week, with NYMEX announcing a partnership with JP Morgan and Morgan Stanley, among others, to set up a...
Beware The Vagaries Of Government
I just came across this article on potential problems with the emerging trade in carbon credits. The piece is not technical and I wouldn't say that it is particularly well-researched, but it does raise a key point - as the market for carbon emissions grows, the need for standardization and collaboration between governments and regulators will become ever more pressing. This could create problems. The carbon market is unique in that the commodity traded derives its value primarily from its ability to meet the requirements set by an environmental regulator. There is also a market for voluntary...
NYMEX To Get Involved In Emissions Trading
A senior NYMEX official told reporters Wednesday that the exchange was considering getting into the business of carbon emissions trading. Given the actual, but especially the potential, size of this market, it makes sense that established bourses would take a good hard look at it. This will probably not be seen as very good news by the folks at Climate Exchange plc . Of course, until NYMEX actually unveils anything substantial, this will remain nothing but chatter.
The Republican-Proposed Carbon Tax
by Noah Kaufman A group of prominent conservative Republicansincluding former Secretary of State James Baker III, former Treasury Secretary Hank Paulson, former Secretary of State George Shultz and former Walmart Chairman Rob Waltonmet with key members of the Trump administration on Wednesday about their proposal to tax carbon dioxide emissions and return the proceeds to the American people. Such an economy-wide tax on carbon dioxide could enable the United States to achieve its international emissions targets with better economic outcomes than under a purely regulatory approach. Attributes of the Republican Carbon Tax Proposal While the details on the...
Climate Change & Corporate Disclosure: Should Investors Care?
Charles Morand On Monday morning, I received an e-copy of a new research note by BofA Merrill Lynch arguing that disclosure by publicly-listed companies on the issue of climate change was becoming increasingly "important". The note claimed: "e believe smart investors and companies will recognize the edge they can gain by understanding low carbon trends." I couldn't agree more with that statement. It was no coincidence that on that same day the Carbon Disclosure Project (CDP), a non-profit UK-based organization that surveys public companies each year on the state of their climate change awareness, was...
Trading Places: Will America’s Carbon Market Outsize Europe’s?
Charles MorandIn early January, I said the following on the likelihood that the Obama Administration would move on carbon regulations in the near-term: "The next 12 to 18 months are unlikely to produce much in the way of vigorous environmental action on the part of government (barring subsidies for alternative energy related to the stimulus package), especially if it means additional costs on industry." Clearly, I had underestimated the power of another fundamental rule of politics - besides "don't anger the rust belt states that gave you your presidency by burdening their industries with avoidable costs in the midst...
Ten Insights into Carbon Policy and Its Implications
On November 27, I attended the National Renewable Energy Laboratory's (NREL) Fifth Energy Analysis Forum, hosted by NREL's Strategic Energy Analysis & Applications Center. The forum focused on carbon policy design, the implications for Renewable Energy and Energy Efficiency. As a stock analyst focused on that sector, I am extremely lucky to have NREL as a local resource: the quality and the level of the experts at NREL and the ones they bring in is probably not matched anywhere in the country, and conferences like these provide priceless insights into what these Energy Analysts are thinking. Why should investors...
Has Shale Gas Reduced Carbon Emissions?
Jim Hansen Last week, I wrote that the U.S. is on course to set a new export record of coal. A few days later the EIA made similar projections and estimate that exports will reach 125 million tons for 2012. One side effect of the success of U.S. coal exports is the degree to which may they have cancelled out the carbon emissions reduction experienced in the U.S. as shale gas displaced coal in the power generation sector. This question of displacement was addressed in a study just released by researchers at the University of...
Fossil Fuel Industry: Killing the Customer
by Debra Fiakas, CFA
Published by the Climate Accountability Institute, the Carbon Majors Reportlays bare the truth about which companies are responsible for industrial greenhouse gas emissions. One hundred fossil fuel producers are linked to 71% of global industrial greenhouse gases emitted since 1988. Something like a line in the sand for climate scientists, 1988 is the year human-induced climate change was official recognized by the Intergovernmental Panel on Climate Change.
Fossil fuels in the form of coal, crude oil and gas are by far and large the culprits. Rolling forward three decades later, we can observe in the charts below that fossil fuel production...
US Exchanges And Environmental Investing
An interesting bit of follow-up on my article last week about exchanges and environmental markets. Both the NYMEX and the Chicago Climate Exchange (CCX) have partnered up, in the past 2 weeks, with specialty cleantech and alt energy index makers to launch derivatives products. On March 14, Chicago Climate Futures Exchange (CCFE), a wholly owned subsidiary of the CCX, and WilderShares LLC, announced (PDF document) a licensing agreement to launch a futures market based on the WilderHill Clean Energy Index . The ECO is also the underlying index for the Powershares WilderHill Clean Energy Portfolio ETF...
Carbon Finance…The Next Bonanza
Few investors outside of Europe have ever heard of the term carbon finance. What some investors might have heard, however, is that Goldman Sachs took, on September 20, 2006, a 10.1% stake in a little outfit known as Climate Exchange plc (LSE:CLE) for approximately $23 million. Admittedly, by Goldman Sachs standards, that’s peanuts. Not to be outdone, Morgan Stanley unveiled a plan on Thursday October 26 to invest a whopping $3 billion in global carbon markets over the next few years…now that’s the kind of money that gets folks talking at the water cooler, especially when it’s in something...
Climate change, carbon trading and America…it’s only a matter of time
Just a quick follow-up on my carbon trading post a few days ago. Thanks to GreenBiz.com for the heads up on the results of a survey that were released during MIT's seventh annual Carbon Sequestration Initiative Forum. The results show that climate change now tops the list of environmental concerns for Americans. I don't want to reveal too much here since this is a GreenBiz.com story, but it suffices to say that this provides yet more ammunition to the political backers of a framework to reduce greenhouses gases in America. Momentum is building and there will definitely be some...
Carbon ETFs/ETNs: Playing Copenhagen
Charles Morand At $126 billion transacted in 2008, up from $11 billion in 2005, the global carbon market is the fastest growing commodities market in the world and, provided that an agreement is reached at the COP15 conference in Copenhagen and that the US adopts a cap-and-trade program, this growth could go on for several more years. Yet this is a market that remains comparatively unknown for a number of reasons, not the least of which is the fact that the rules surrounding it are very complex. Unlike other commodities, to successfully invest directly in...
