OPPORTUNITY: CARBON

Crisis and opportunity. Crisis and opportunity. Crisis and opportunity...

Carbon credits offer gold, but no easy path
Steve Gelsi, February 23, 2007 (Dow Jones MarketWatch)

- Although carbon-credit trading could mushroom into a multi-trillion dollar marketplace while reducing greenhouse gas emissions, potential investors face a complex regulatory environment and other major risks…
- "The investment opportunity is [a $3 trillion market]," author and consultant Peter Fusaro said…"There are untapped pools of capital looking for projects to scale."
- Fusaro traced the roots of the business to Wall Street, with an expert in mortgage-backed securities, former Salomon Smith Barney executive Lewis Ranieri, inspiring the business of trading sulfur-dioxide credits to reduce acid rain.
- The resulting marketplace for sulfur-dioxide trading, laid out in the 1990 Clean Air Act, is being used as a model for U.S.-based carbon trading, which is already rolling out in several states, including California, and on a voluntary basis at the Chicago Climate Exchange.

- Randy Lack of Element Markets, a specialist in emissions trading, said he expects legislation on the federal level by the end of 2009…proposals are under…Congress will be holding hearings…"You can expect every presidential candidate to introduce some kind of bill," said Lack…
- Major Fortune 500 companies are eying the business…The government would assign emission allowances for the roughly 6.5 billion tons of carbon dioxide and other greenhouse gases produced in the U.S. each year.
- Producers…make money by reducing their emissions and selling their allotted pollution credits to others.
- Wall Street would help broker carbon-unit trading, plus global marketplaces would kick in by selling futures and other derivative products based on price fluctuations and other factors…private equity and venture firms eying the market could buy existing or future emission credits…but the move carries risks associated with an uncertain regulatory environment.

- Another possible venue would be putting money into…solar businesses, wind power or other forms of alternative energy…"the highest potential for profitability and there's a wide range of opportunities," [William Bumpers of law firm Baker & Botts] said.
- Funds could also invest in carbon and technology funds through a more traditional venture capital method…
- U.S. consumers will be offered an affinity credit card that sets aside 1% of spending for curbing greenhouse gas emissions…In a test launch in the Netherlands, the card drew three times the spending level of other credit cards…Financial partners for the card will be announced on or around Earth Day in April…