Bullish on Carbon

In London, the carbon trading market is exploding, according to a New York Times article excerpted here:

Carbon could become “one of the fasting-growing markets ever, with volumes comparable to credit derivatives inside of a decade,” said Chris Leeds, 38, who is the head of emissions trading at Merrill Lynch here and who plans to expand his team to five traders from two by the end of the year.
Investment banks like Goldman Sachs and Morgan Stanley have rapidly expanded their carbon businesses. Scattered among the hedge funds and private equity funds in the Mayfair district of London are recently arrived niche investment banks that generate one of the main currencies of this emerging sector: carbon emissions reductions.
The emergence of carbon finance in London — not only trading carbon allowances but investments in projects that help generate additional credits — is largely the result of a decision by European governments to start limiting the amounts that industries emit.
Factories that pollute too much are required to buy more allowances; those that become more efficient can sell allowances they no longer need. The system, started in 2005, is part of the terms of the Kyoto Protocol and bears the imprimatur of the United Nations. Even so, doubts remain as to whether carbon finance can deliver tangible emissions reductions, let alone the vast economic transformation needed to deal with climate change.
For now, green-minded graduates and an eclectic range of professionals from banks, consulting companies and aid organizations are pushing to join the new sector.
“We don’t have to advertise,” said Mark Woodall, 45, chief executive of Climate Change Capital, an investment company based in an elegant 18th-century townhouse in the heart of Mayfair. ”People feel quite good about working in an organization like this.”
Mr. Woodall has 120 employees with an average age around 30 and more than 10 full-time employees in China. He expects to hire 80 people in the next two years.
A former British Army officer, he started his first company 15 years ago, cleaning up waste and chemical spills.
The industry has not avoided criticism. One reason is that European governments handed out too many free allowances in preparing for the start of the program, rendering the system less effective than was hoped. The overallocation fueled volatility, and some traders reaped larger-than-expected profits.
Controversy has also dogged some projects promoted by the financiers to generate new credits.
But over all, prospects for the industry are good, especially if the United States joins the Europeans in establishing a trading system, said Imtiaz Ahmad, 34, senior carbon trader for Morgan Stanley in London. Mr. Ahmad has already lured a European Union environment official and a BP employee to join his three-member trading team, and he plans to hire more.
Human activity creates some 38 billion tons of carbon dioxide each year, and governments regulate only a fraction of that. But if more governments decide to cut billions more tons of emissions, as leaders of top industrial nations discussed recently in Germany, and if the existing system in Europe is enlarged to cover transportation, there will be many more credits available — and a lot more finance and trading.

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"We Are Trying to Preserve...God's Creation"

The Oakland Tribune reported on the United State's rejection of the EU's climate plan.

The United States rejected the European Union's all-encompassing target on reduction of carbon emissions, President Bush's environmental adviser said Tuesday.
James Connaughton, chairman of the White House Council on Environmental Quality, said the United States is not against setting goals but prefers to focus them on specific sectors, such as cleaner coal and reducing dependence on gasoline. "The U.S. has different sets of targets," he said.
Germany, which holds the European Union and Group of Eight presidencies, is proposing a so-called "two-degree" target, whereby global temperatures would be allowed to increase no more than 2 degrees Celsius — the equivalent of 3.6 degrees Fahrenheit — before being brought back down. Practically, experts have said that means a global reduction in emissions of 50 percent below 1990 levels by 2050.
Connaughton, on a one-week bipartisan trip to Europe with members of the House of Representatives, said the U.S. favors "setting targets in the context of national circumstances."
In Hamburg, Asian countries, including rising global powerhouses China and India, reluctantly agreed Tuesday to back European calls for a new climate change treaty by 2009 to limit greenhouse gases after the Kyoto Protocol expires.
The deal was a step forward for German Chancellor Angela Merkel's push for a climate deal at next week's G-8 summit.
Despite the disagreements, Connaughton said the G-8 meeting, which brings together the leaders of Germany, the U.S., Russia, Britain, France, Italy, Canada and Japan, could still result in a productive conclusion.
"Let the G-8 process run its course," he said. "Give the leaders a chance."
House Speaker Nancy Pelosi, who opposes Bush on climate policy, urged international cooperation in tackling climate change.
Pelosi, on a separate trip to Berlin, hailed Chancellor Angela Merkel's "extraordinary leadership" in fighting climate change and agreed "that these solutions must be multilateral."
"We are trying to preserve the planet, which many in our country, including I, believe is God's creation, and we have a responsibility to preserve it," Pelosi said, speaking alongside the German leader after a meeting at the chancellery.

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EU Pledges Emissions Cuts

The EU has ratified its proposal to cut greenhouse gas emissions 20% by 2020, even if other countries (like the US and China) don't agree to similar cuts.

According to Bloomberg,

EU leaders rejected warnings from business groups that tougher climate regulations would push jobs and investment out of Europe, shackling an economy that has lagged behind the U.S. for most of the past decade.
Europe is opening ``the door into a whole new dimension of European cooperation in the area of energy and combating climate change,'' German Chancellor Angela Merkel told reporters today after chairing an EU summit in Brussels.
Europe's economy notched the fastest growth in six years in 2006, and the political leaders said the climate-change package will give the 27-nation bloc a ``first mover'' advantage in developing energy-saving technologies.
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Chirac to Bush: Sign Kyoto or Else!

French President Chirac has reportedly warned US President Bush that the US must sign on to the Kyoto Protocol and the successor agreement (Kyoto expires in 2012), or face paying carbon taxes, according to the International Herald Tribune.

Chirac repeated his call for the creation of a global environment organization that would centralize about 500 international agreements on the environment and 18 international bodies and departments whose remit is environmental.

"The system is not efficient; it's a fragmented system," Chirac said. "We must have a UNOE — a UN organization for the environment — which would in some sense be the environmental conscience of the world and which would be capable of coordinated action."

He said such an organization would have the power to impose sanctions on member states and could be modeled on the World Health Organization.

Chirac spoke as scientists from around the world gathered in Paris to discuss an authoritative international report on climate change, portions of which will be released on Friday.

Critics of Chirac say that despite his environmental rhetoric, his record as president is far from green. Chirac angered environmentalists when he conducted nuclear tests in a Pacific atoll within months of coming into office in 1995. He has been a loyal ally of French farmers and their highly polluting sector, blocking several proposed Europewide reforms. Most recently, Brussels rejected a French national plan for allocating carbon-emission credits to businesses for being too generous.

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EU's Radical New Climate Change Policy

The European Commission has announced new targets for cutting greenhouse gas emissions as part of its new proposed energy policy. It proposes dropping emissions to 20% below 1990 levels by the year 2020. If the European Union adopts this new Climate-Change fighting energy policy it would be the most ambitious ever.

Read the rest of the story at Reuters.

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Climate Change will kill 90,000/yr. by 2071

That's the dire prediction of a report for the European Commission. According to an article in the Financial Times,

The Commission will endorse the report next week and use it to back its case for action to limit the rise in the world’s average temperature to 2 degrees centigrade above 1990 levels. Ironically, those countries most committed to combating climate change, such as the UK and Sweden, would gain, with warmer temperatures bringing bigger crop yields and fewer deaths from cold.

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Europe to cut CO2 Emissions

The European Union is considering a stringent CO2 emissions trading plan to take effect 2008-2012 to combat global climate change. Read about it here.