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).