Deals that can save you the Earth

With the Howard government releasing a emissions task force report on the next steps for Australia embarking on a carbon trading regime, there are tons of articles on this in the Australian newspapers. My link log provides some of the good ones.

This Brisbane Times article discusses how Carbon trading may work.

For every coffee, muffin or bottle of water sold by Antonino Iaccarino at his North Sydney cafe, E Vero, a few cents goes to fund an energy efficiency project somewhere else in the city.

Iaccarino, who sub-leases in a large office building, can do little to cut his greenhouse gas emissions because he cannot change the source of electricity powering his business.

Instead, he is doing his bit for the environment by proxy. Or at least, his customers are. Iaccarino gives the money he raises from his environmental levy to one of the many companies setting up in the business of cutting greenhouse gas emissions.

The Carbon Reduction Institute uses funds raised by businesses such as E Vero to buy and install compact florescent lightbulbs in buildings that use a lot of electrical lighting, such as hotels. The deal is priced to cover the lightbulbs, their installation, and a little extra for the institute.

The cut in greenhouse gas emissions achieved by the new lightbulbs is recognised by the NSW Government in the form of carbon certificates. Those certificates, or credits, are worth money.

In exchange for the energy-efficient light bulbs, the hotel signs away its carbon credits to the institute.

The cafe is now “carbon neutral”, the hotel has cut its electricity bill and the institute has made a tidy profit.

Welcome to the brave new world of carbon trading, a commodity market that could one day be the world’s biggest. This is the market that promises to plant the trees, cap landfill gases, or improve energy efficiency in developing countries to neutralise the pollution emitted by our cars, our homes and our plane travel. It’s also the market that will constrain the ability of power plants and heavy industry to pollute.

There are carbon brokers, carbon trading exchanges, even carbon futures. The world’s big banks are all setting up carbon trading desks and fund managers are providing finance for projects that cut emissions. Citibank alone this year committed $US50 billion to environmental projects.

An entire support industry has arisen to service these carbon traders; lawyers to write carbon contracts, experts to verify emissions cuts have taken place and accountants to audit carbon inventories.

Molitor, the former director of climate change services at PricewaterhouseCoopers, estimates that 600 billion tonnes of carbon emissions projected to be emitted over the next 43 years will have to be avoided to stabilise the climate.

If you price carbon at $US25 a tonne (seen by many as the minimum needed to direct investment away from polluting sources of energy and towards cleaner sources) you have a capital-market opportunity of $US15 trillion, he says.

“This would be the largest global financial market opportunity in history. The question Australia needs to answer is: how much of that $15 trillion is coming our way?”

One interesting bit from the article is the estimation Molitor provides on the possible size of the global carbon market. This is the first time I have seen somebody put a number on this. It clearly shows the reason why Investment banks are gearing up to the new commodity on the market. And as highlighted above, an entire new industry is coming up providing new jobs in many different roles.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s