Opportunities are in the air

My attention was caught last weekend by a segment in Maria Bartiromo’s Wall Street Journal Report about how investors can cash in on the pollution market.

According to Richard Sandor, CEO of Chicago Climate Exchange, the carbon industry would be huge and would ultimately be the largest commodity in the world. He noted the success of the EPA’s Clean Air Act in reducing acid rain as one of the main drivers in the push for carbon trading as alternative to carbon tax.

He said he is both an environmentalist and a capitalist (yes now you can be both!).

He is not the only one citing opportunities (and challenges) in the new era of carbon market.

In AMR Research‘s recent survey, majority of the respondents identify business opportunities, corporate brand, and competitive advantage when it comes to green. The problem is that when it comes to tracking their greenhouse gas emissions, only 54% of the respondents are tracking GHG emission data, and significantly fewer (34%) publicly report the information.

Reasons behind the resistance to develop GHG emissions managementprogram, according to the AMR survey, include lack of IT systems, lackof government incentives to offset costs, lack of legislative guidance,customer resistance to increased prices, challenges of collectingsupplier-related data, and a lack of executive commitment.

AMR reported that costs might be high but in the long (or short)run, the carbon age is now here and delaying action may result indamage to reputations and will ultimately be more expensive.

“You don’t have to believe in global climate change orits potential environmental impact to recognize that it presentsserious risks to global and corporate-level economic development andwell being. The transition to a low-carbon economy will bringchallenges for competitiveness but also significant opportunities forgrowth.”

Another report – “Carbon Emissions: Measuring the Risks“- is from NSF International and Trucost PLC, which analyzed the GHGemissions of S&P 500 companies in several different sectors,including chemicals, food and beverage, healthcare, industrial goodsand services, personal and household goods, automobiles and parts andretail.

“Climate change representsserious challenges as well as risks and opportunities to U.S.corporations. The first step in mitigating those risks is to calculatecarbon emissions and their potential costs from direct operations andsupply chains,” said Malcolm Fox, Vice President Corporate Services,Trucost, an NSF International Partner.

Some of the report’s findings include:

  • The average major U.S. industrial good/services company emits 1.2 million metric tons of GHGs annually.
  • Over70% of emissions originate from supply chains, representing a seriousfinancial exposure as costs are passed on to manufacturers.
  • Thecost of carbon may reach as high as 18 percent of earnings for somefirms, as measured by earnings before interest, taxes, depreciation andamortization (EBITDA).

4 Responses to Opportunities are in the air

  1. Pradeep 22 August, 2009 at 9:36 am #

    A cap-and-trade-based carbon market represents a good opportunity, but the question is whether the public (who will pay higher utility rates because of the cap) are ultimately getting some returns. From a public perspective, it is imperative that the government institutes measures in place which lessen the impact on the taxpayers and ensure that a few big (stock trading) companies are not playing the system.

  2. Sean 24 August, 2009 at 1:32 pm #

    I am old enough to remember the debate almost 30 years ago on weather or not to put MTBE in gasoline as an additive. For a long time oil companies were opposed but the environmentalists wanted to clean the air. (As it was, the oxygenates had little effect on 95% of the new cars, it was mostly to clean up the exhaust of old cars without functioning catalytic converters and advanced air fuel mixture systems). Well the oil companies compromised with the environmentallists and 100% of the gas powered vehicles ended up paying ~10% more for gas that they got a little less mileage out of to solve a problem in 5% of the fleet. Then just last year, all that MTBE came out of gasoline because of the real problems it caused with groundwater. (Just in time to make an opening for the ethanol lobby!)

    At that time that MTBE was put in gasoline, I decided that when corporations and environmentalists start shaking hands and posing for pictures you’d better look out because the corporations just got a “green” government blessing to charge more for a product that product that provides no extra benefit. Mr. Sandor, who bills himself as both a capitalist and an environmentalist has taken this to its logical extreme…he gets to make significant fees selling perhaps the most intangible of items, the rights to exhale the air people breath.

  3. Gary 24 August, 2009 at 2:41 pm #

    Absolutely amazing.
    The ultimate in Scamming the public.

    An entire market built on trading lies, junk science and rediculus myths.

    An the american people are embracing it.

    I guess that is what you get for dumbing down the education system.

  4. Woody 24 August, 2009 at 5:41 pm #

    Perhaps the more profound question is if we create a huge carbon market out of thin air (pun intended) based on less than solid science and political strong-arming without faith from the masses that we have a real problem, what happens when the world enters another Dalton Minimum (FYI the signs are increasing that we’re headed for one) with 30-60 years of extended cooling? Man-made climate change would be discredited, it would cause a massive crash in the carbon market and cripple economies world wide (Dutch tulip crash, anyone?).

    When you believe in things you don’t understand, then you suffer.

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