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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Global Warming and Profiting from Investing in Carbon Trading

Companies / Analysis & Strategy Oct 30, 2006 - 02:49 AM GMT

By: Sarah_Jones

Companies The Kyoto pact has spurred billions of euros in greenhouse trade between companies in Europe and through a program that allows rich countries to pick up credits for investing in clean projects in developing countries.

The first phase of the pact requires about 35 developed countries to cut emissions of 5% from 1990 levels by 2008 to 2012.
But carbon dioxide-belching oil refineries and power plants, beyond some in Europe, mostly have yet to join in. That's mainly because President George W Bush withdrew US – the top polluter – from the international agreement, and as rapidly developing countries like China, India and Brazil oppose emissions limits because they have only recently industrialised.

But this is likely to change as the economic impact of global warming starts hitting and the carbon trading market could be transformed from a $10 billion a year market to a $1 trillion market.


Recently Morgan Stanley, the investment bank, announced a $3bn plan to invest in the carbon trading market amid mounting evidence that some US states are growing more sympathetic to international action. The moves come just days before a UK government report is expected to propose a huge expansion of the global market in trading permits for carbon dioxide emissions. It will also propose extending existing mechanisms for western companies to benefit from promoting cleaner energy in poor countries.

How to invest in Carbon Trading ? : There are two ways to invest, first is directly into the firms that trade in carbon emission contracts and the second is in carbon credit producing energy projects to reduce greenhouse gas emissions which can be traded against carbon production.

Investment Trusts : The safest way into the sector is probably is via a fund or investment trust, which spread the risk amongst an basket of companies, these investments are managed by the fund manager and hence should represent much less risk than an individual stock investment.

Ironically the oil companies may also be a good carbon play, due to most majors such as BP and Shell investigating alternative, cleaner energies as well as carbon offset technologies many of which are being implemented.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments


30 Oct 06, 05:03
Re: Global Warming and Profiting from Investing in Carbon Trading
you may be interested in this about the financial costs of global warming -

Global warming will cost the world up to seven trillion dollars in the next decade unless governments take drastic action soon, according to a major British report.

Former World Bank chief economist Sir Nicholas Stern was commissioned last year by finance minister Gordon Brown to lead a review into the economics of climate change.

The Observer newspaper on Sunday published excerpts from the 700-page report, which adds that unchecked global warming could make 200 million people refugees from drought or flood.

Publication of the report is likely to fuel debate in Britain over whether the government should introduce a tougher regime of "green taxes" to cut carbon emissions.

According to the Observer, the Stern report says unchecked climate change would cost up to 3.68 trillion pounds (6.98 trillion dollars) - more than World Wars I and II and the Great Depression of the 1930s.

It also warns that the world needs to spend about one percent of global gross domestic product - equivalent to about 184 billion pounds - on the issue now or face a bill up to 20 times higher than that in future, the paper says.

Kyoto successor needed now

Stern also calls for a successor to the Kyoto agreement on greenhouse gases to be signed next year, not in 2010 or 2011 as planned, because the problem is so urgent, it adds.

Failure to act quickly would trigger a global recession, he reportedly adds, and calls for an international framework to tackle the issue.

The Observer says his report is the first heavyweight contribution to the debate on climate change by an economist rather than a scientist.

Environmental activist group Greenpeace said it removed any doubt about the need to tackle climate change.

"If we are to avert catastrophe then there has to be a real cost to emitting carbon and that means higher taxes on flying and gas-guzzlers. We owe it to future generations," a spokesperson said.

31 Oct 06, 13:33
Re: Global Warming and Profiting from Investing in Carbon Trading
In the hefty report, Stern pointed out that there was a great risk of grave economic stagnation and estimated that it would cost about 5.5 trillion euros.


According to the report, if countries do not reserve one percent of their gross national product for the struggle against global warming today, they will have to pay five to 20 percent of their economies in the future.


Stern urged governments to act immediately and also warned that even a 10-15 year delay would drag the world to the brink of a catastrophe.

However, he also added that because the world has both the financial resources and time to prevent a possible crisis, there is good reason to be optimistic.


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