BUSINESS PREPARES FOR CAP-AND-TRADE

This is the debate of our time: Be it tax or cap-and-trade, we've got to start paying for the effects of the greenhouse gases we emit when we burn fossil fuels.

Companies Gear Up for Greenhouse Gas Limits; Trading of Permits Grows as Congress Considers Caps
Steven Mufson, May 28, 2007 (Washington Post)

WHO
U.S. legislators businesses and companies: Goldman Sachs, MissionPoint Capital Partners, Marsh (ins co), Cheyne Capital Management (hedge fund), AES (utility), General Electric, TXU (utility), EcoSecurities (Eron Bloomgarden, U.S. director, carbon credit dealer), Department of Energy (Clay Sell, deputy secretary),
good question (click to enlarge)
WHAT
In the absence of political leadership, business and industry are making investments in preparations for greenhouse gas (GHG) emission caps. Examples: coal-fired power generators checking their plans, fund managers are investing billions, insurance firms protecting themselves, one utility has inserted a global-warming contract provision.

WHEN
Emission caps: "It's a matter of when, not if," Paul Hanrahan, CEO, AES
Change is afoot. Initiatives and investments are unfolding, some happening now, some not to reach fruition until after the 2008 presidential decision and some farther on.

WHERE
The U.S. Europe is way ahead, the developing world is even more reluctant to do the right thing than President Bush.

WHY
- The current administration is waiting and watching China and India. The Regional Greenhouse Gas Initiative, a group of Northeastern states, is planning to launch a cap-and-trade system in 2009.
- Senate committees have five cap-and-trade system bills; 21 major corporations, a coalition, calling for immediate action
- Estimated voluntary credit market this year: 16-fold increase to $400 million, $3 trillion by 2010.
- Wisconsin energy sold a nuclear plant to FLP Group but kept all emission credits for 7 years and half thereafter.
- TXU shelved plans for coal plants and bought wind farms.
- Mark Schwartz & Jesse M. Fink started a $300 million fund for climate change projects, MissionPoint Capital Partners; Goldman Sachs invested $1.5 billion over two years in what it calls "alternative energy" and "clean technology."
- Goldman subsidiary Cogentrix Energy will build a $2 billion coal gasification power project that will separate CO2 for enhanced oil recovery (EOR) or underground storage (CCS). Other Goldman investments: wind-farms, solar photovoltaic cell manufacture; wind turbine manufacture; cellulosic ethanol; the Chicago Climate Exchange (voluntary carbon credit trading)
- Insurance companies are selling protection against climate change.
- Regulation and certification of credits is being prepared.
- Steel companies, seeing the cost of emissions coming, are desparately cutting.
the pols are all over it -- and might do something after November, 2008 (click to enlarge)
QUOTES
- Bloomgarden: "It is becoming clear that the carbon-constrained economy has arrived and carbon regulation or climate-change regulation in the United States is clearly in the works…That presents both opportunities and risks for companies. So companies that recognize those opportunities can capitalize on them, and those that don't will suffer."
- Sell: "The position we've taken to date is that we're opposed [to a cap and trade system]…The view of our administration is that we have to think of the challenge of greenhouse gases in a global context."
- MissionPoint: "We're certainly assuming that demand for clean energy and energy efficiency is going to increase on account of concerns over climate change…We have a sort of implicit assumption that there will be a cost of carbon in the United States, and we fully expect there to be a cap-and-trade system at some point."