Carbon markets- here come the Americans...
September 20th, 2006- Goldan (NYSE:GS) invests $23m in the London-listed Climate Exchange Plc (LSE:CLE.L), which has a subsidiary in Chicago.
October 26th, 2006- Morgan Stanley (NYSE:MS) announces that it will invest a much larger $3bn in global carbon markets over the next five years
Money talks, and its starting to say that the global carbon credits trade could become more than some "fluffy European" idea. The above are US I-banks afterall.
Business is already booming [in the US], said Richard Sandor, founder of the Chicago Climate Exchange, which is teaming up with the Montreal Exchange ...
"From my point of view, the commoditization of air and water will be one of the great trends of the 21st century," said Mr. Sandor, who pioneered financial futures trading in the 1970s.
His three-year-old exchange has seen volume surge to more than eight million tonnes so far this year from 1.5 tonnes for all last year. Membership has swelled to more than 200 members from 14 and, as demand grows, the price of carbon has doubled to $4 (U.S.) per tonne from $2 last year. In Europe, where emissions reduction targets are mandatory, credits trade above $18.
Then more reasons to think that carbon trading could be coming to the US:
Most folks outside of environmental or political punditry circles probably didn’t pay too much attention to the signing into law of Assembly Bill 32 in California just a few weeks back. AB 32 will impose firm caps on GHG emissions in that state, the 6th largest economy in the world, starting in 2012, and will in all likelihood rely on carbon trading to achieve its targets.
The Regional Greenhouse Gas Initiative (RGGI) is another interesting development that has been in the works for some time. RGGI will cap GHG emissions from power producers in Northeastern and Mid-Atlantic states and establish a trading system starting in 2009. Even more interesting is the growing number of commentators that now predict federally-imposed GHG emissions targets sometime in the near- to medium-term.
Seeing as the US (a) accounts for about 25% of global GHG emissions and (b) houses the most liquid financial markets in the world, we could be talking about some pretty big money here. A recent Financial Times article estimates that, should consensus be attained on a plan to fight global climate change between the largest emitting jurisdictions, expenditures could top $1,000 billion within 5 years.
Seen under this light, those recent announcements by Morgan Stanley and Goldman Sachs look increasingly less like a means to placate environmentalists and earn a little goodwill, and increasingly more like pretty sound strategic positioning to cash in on one of the biggest business opportunities of the 21st century.
For those with friends in high (low?) places, there is a report out from Citigroup (NYSE:C) available upon patronage and flattery. (and unfortunately not to us)
Want to hear about carbon trading 24/7? We thought so. Check out the carbon trading info provider Point Carbon. Download: Also, for those interested Point Carbon's free North American Carbon Trading Report, "US: The hibernating giant", is here.
Strangely, Point Carbon doesn't seem to be listed yet... c'mon... pure play in a sexy sector.
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