Environmental Markets

A couple of interesting news from Wall Street this week in the realm of carbon finance. Firstly, on Tuesday, JP Morgan announced the launch of what is, as far as I can tell, the first ever bond index with a special climate change risk overlay. In the interest of disclosure, I was tangentially involved with this project. While this overlay probably won't have much of an impact in the very near term, it will be interesting to see what happens once constituent firms are all subjected to some form of greenhouse gas regulation. Second, on Thursday, Lehman...

by Elaine Thompson Bloomberg New Energy Finance, in an executive summary of its New Energy Outlook 2017 report, predicts renewable energy sources will represent almost three-quarters of the $10.2 trillion the world will invest in new power-generating technology. Analysts outline several reasons for this increase in spending, such as the decreasing costs of wind and solar and consumers’ increasing interest in solar panels. Competition between power sources also continues to grow, with products like utility-scale batteries upsetting coal and natural gas’s roles in the marketplace. But more importantly, state-driven renewable portfolio standards pave the way for additional ventures in renewable energy technologies, particularly...

The World Bank Carbon Finance Unit recently released its Q3 2006 update for the global market for CO2 emissions (the carbon market). The document, entitled “State and Trends of the Carbon Market 2006��? (PDF file), contains some pretty interesting information that makes it difficult not to be bullish on the future of emissions trading. Here are some numbers. At the end of Q3 2006, the total value of the market stood at $21.5 billion, up 94% on the whole of 2005 ($11.1 billion). Unsurprisingly, Europe, with its Emissions Trading Scheme, continues to account for the bulk (~99%) of...

by Debra Fiakas CFA Algae in the River Wate photo via BigStock My post “Algae Takes Flight” featured Algae-Tec (ALGXY:  OTC/PK),  Lufthansa’s new biofuel partner.  Algae-Tec has agreed to operate an algae-based biofuel plant in Europe to supply Lufthansa with jet fuel.  Lufthansa is footing the capital costs of the plant, which is to be located in Europe near a carbon source.  Algae thrive on carbon so industrial plants and power plants using fossil fuels make the best neighbors.  Lufthansa has agreed to purchase a...

Over the past two weeks, a couple of announcements were made that went mostly unnoticed despite their importance to the North American carbon marketplace. Firstly, on May 30, the Montreal Exchange, a derivatives exchange, announced that it was launching an emissions trading market for CO2. The Montreal Exchange is now a unit of the TSX Group (TSXPF.PK or X.TO), the firm that runs all of Canada's exchanges. The second announcement came last week, when the premiers of Quebec and Ontario, Canada's two largest provinces and the heart of its industrial base, announced that they were moving ahead...

Just a quick follow-up on my carbon trading post a few days ago. Thanks to GreenBiz.com for the heads up on the results of a survey that were released during MIT's seventh annual Carbon Sequestration Initiative Forum. The results show that climate change now tops the list of environmental concerns for Americans. I don't want to reveal too much here since this is a GreenBiz.com story, but it suffices to say that this provides yet more ammunition to the political backers of a framework to reduce greenhouses gases in America. Momentum is building and there will definitely be some...

Biochar is still mostly a research and cottage industry, yet it has the potential to impact returns for a broad range of investors. Tom Konrad, Ph.D., CFA Biochar, or amending soil with biomass-derived carbon, shows great potential to improve the productivity of soils, as well as to increase the utilization of fertilizers by plants, while sequestering carbon to reduce the drivers of climate change.  On August 10, I went to the 2009 North American Biochar Conference to look at the potential for investors.  Before I went, I took a look at the publicly traded companies...

One of our readers made a useful comment on our last post about Goldman Sachs and Climate Exchange plc. I thought some of you who are unlikely to go back to that post might be interested: "Hey this article on the Climate Exchange was great information. But you should tell your readers that there is an ADR trading OTC here in the states - CXCHF. Get it while the gettin is good. How long 'til GS takes this to the big board?" Thanks for this heads up, cascadehigh. UPDATE: Following this post, I got the...

I just came across this article on potential problems with the emerging trade in carbon credits. The piece is not technical and I wouldn't say that it is particularly well-researched, but it does raise a key point - as the market for carbon emissions grows, the need for standardization and collaboration between governments and regulators will become ever more pressing. This could create problems. The carbon market is unique in that the commodity traded derives its value primarily from its ability to meet the requirements set by an environmental regulator. There is also a market for voluntary...

A senior NYMEX official told reporters Wednesday that the exchange was considering getting into the business of carbon emissions trading. Given the actual, but especially the potential, size of this market, it makes sense that established bourses would take a good hard look at it. This will probably not be seen as very good news by the folks at Climate Exchange plc . Of course, until NYMEX actually unveils anything substantial, this will remain nothing but chatter.

The carbon markets are an area of keen interest for me personally and professionally, so it is always frustrating that the mainstream media largely refuses to learn the details. In general, layman and media who don’t understand the details of the carbon markets attack carbon offsets in two areas, first, questioning whether the credits are for a project that would have occurred anyway (a concept known in carbon as “additionality”), and second questioning whether there are checks and balances to ensure the environmental standards are adhered to and the abatement actually happens (in carbon known as the validation...

Jim Hansen Last week, I wrote that the U.S. is on course to set a new export record of coal. A few days later the EIA made similar projections and estimate that exports will reach 125 million tons for 2012. One side effect of the success of U.S. coal exports is the degree to which may they have cancelled out the carbon emissions reduction experienced in the U.S. as shale gas displaced coal in the power generation sector. This question of displacement was addressed in a study just released by researchers at the University of...

Charles MorandIn early January, I said the following on the likelihood that the Obama Administration would move on carbon regulations in the near-term: "The next 12 to 18 months are unlikely to produce much in the way of vigorous environmental action on the part of government (barring subsidies for alternative energy related to the stimulus package), especially if it means additional costs on industry." Clearly, I had underestimated the power of another fundamental rule of politics - besides "don't anger the rust belt states that gave you your presidency by burdening their industries with avoidable costs in the midst...

From Small Fries to Big Shots? Part 1 of 2 by Bill Paul Feel like rolling the dice on some small alternative energy stocks that appear to have big-time potential? Just remember: sometimes you roll snake eyes. First up: World Energy Solutions Inc. (Symbol: XWES), which currently trades on NASDAQ for $3 and change per share. Worcester, MA-based World Energy Solutions operates online exchanges for energy and green commodities, including the one administered by Regional Greenhouse Gas Initiative Inc. (RGGI), the regulatory scheme under which 10 Northeastern and Middle Atlantic states "cap" their power plants' emissions by requiring...

In a May 8 post I opined that, although I believed that recent developments on the climate change file in the US would bode well for Climate Exchange plc (CXCHF.PK), I thought that the stock was overpriced and had had too great a run for its own good over the past 3 months. I therefore predicted that the next move the stock would make would be to the downside. Climate Exchange was trading at around $28 then, and today it is trading in the neighborhood of $36. I continue to believe that this stock is going way too...