As I've been saying would happen, the world greenhouse gas credits market--driven by carbon--rose 80% last year. The rise in carbon market profit, of course, can be attributed to mandatory emission cuts in Kyoto countries as well as to companies in the US seeking to green their image in world where the emission of pollutants is increasingly taboo.
Trading carbon credits grew to be a $60 billion industry last year, up from just $33 billion in 2006. The volume of carbon traded grew to 2.7 billion metric tons, a 64% increase over the year before.
The carbon trade, established by the ratification of the Kyoto Protocol, allows companies that have cut their emissions to below required levels to sell carbon credits--each worth one metric ton of the gas--to other, slower-moving companies. This is also known as a cap-and-trade system.
But for all its economic and ecologic advantages, the US has yet to implement such a scheme, opting instead to do next to nothing on a federal level. But in the wake of federal inaction, many states have stepped up to institute regional plans, like the Regional Greenhouse Gas Initiative (RGGI).
Action for RGGI will commence in 2009 and is aimed at maintaining emissions to 2002-2004 levels by 2015. That period will be followed by a 10% reduction in those levels through 2020. States in the West and Midwest have initiated similar programs.
Banking on Carbon
But the nation's abstention from action on carbon doesn't mean there isn't money to be made. In fact, the exact opposite is true, with a number of banks, hedge funds and exchanges rushing to get a piece of the action.
Even the New York Mercantile Exchange (NYMEX)--home of our domestic commodities trading--has established The Green Exchange, which "will offer a comprehensive range of environmental futures, options, and swaps contracts for markets focused on solutions to climate change, renewable energy, and other environmental challenges."
And the players involved in the new exchange are heavy hitters. The list includes Evolution Markets Inc., Morgan Stanley (NYSE: MS), Credit Suisse Group (NYSE: CS), JPMorgan Chase & Co. (NYSE: JPM), Merrill Lynch & Co., Inc. (NYSE: MER), Tudor Investment Corp., ICAP and Constellation Energy Group, Inc. (NYSE: CEG).
But financial institutions aren't the only ones vying for a spot in the carbon-induced limelight. All over the world corporations are looking for ways to lessen their carbon footprint through a variety of groups and initiatives.
Perhaps the most notable of these schemes is the Supply Chain Leadership Collaboration (SCLC), formed by eleven of the world's largest companies, including Cadbury Schweppes (NYSE: CSG), Dell Inc. (NASDAQ: DELL), Nestle SA (VTX: NESN), PepsiCo, Inc. (NYSE: PEP) and The Proctor & Gamble Company (NYSE: PG).
During the first phase of that program, which ends in March 2008, each participating company selected 50 suppliers to work with. At the end of the phase, the Carbon Disclosure Project will publish a detailed report recommending a standardized approach to the creation of a green supply chain .
The second phase, which will include up to 2,000 suppliers from each participating company, is scheduled to begin in May 2008. Other companies will also be asked to join.
Individual Profit from Carbon
With so much money being tossed around in the carbon market, how is an individual investor to profit?
Unless you have the millions of dollars necessary to fund a carbon reduction project in Asia, you're probably looking for a less capital-intensive way to get into the carbon market.
One of the ways to do that is to invest directly in a company that reduces emissions as a primary part of their business.
A good play in this area is Tenneco Inc. (NYSE: TEN). Tenneco designs, manufactures and distributes automotive emission control products for worldwide use.
As governments and the auto industry race to curb emissions, stemming pollution from the nearly 1 billion automobiles that roam the planet will prove to be a daunting and profitable task.
Tenneco, which makes emission-reduction products for new vehicles and aftermarket applications, is well-positioned to take advantage of this trend.
Another player already benefiting from the carbon reduction movement is Peerless Mfg. Co. (NASDAQ: PMFG). Specializing in systems used for pollution abatement, Peerless has climbed more than 173% in the past year. Take a look at the chart:
This is one that can only go higher as the pressure intensifies to reduce emissions.
Stay tuned to Green Chip for the latest advancements and opportunities in the carbon trading market.
And be sure to keep an eye out for the Alternative Energy Speculator, as I'll be unveiling more lucrative ways to profit from the solutions to climate change.
Until next time,
Nick
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Carbon offsets are a strange concept. Let me show you in layman terms how it works: Al Gore goes to an Italian restaurant and eats a loaf of garlic bread, a plate of
lasagna, a bowl of spaghetti and meatballs, an extra large pizza with seven toppings, a couple bottles of expensive wine and a large assortment of pastries. As a
result, he puts on 10 pounds. But he is deeply concerned that mankind is getting too fat. So he pays 10 peasants in Asia $10 each to eat nothing for a week.
Although they are already skinny, by starving themselves for a week, they each lose a pound. As a result, after a week, mankind is weight neutral. Al Gore weighs 10
pounds more, 10 Asians weigh 10 pounds less -- and Al Gore is given another Nobel Propaganda Prize for his leadership in keeping mankind's obesity in check.
Of course, this example is not quite fair to Gore because that imagined humanitarianism actually costs him cash money. In the real carbon offset business, he looks
forward to being paid for directing other carbon consumers to invest in carbon neutral projects through Generation Investment Management which Gore is the founder and chairman. So Gore will profit from mankind's misery. I'm glad to see he finally has developed the capitalist instinct (like his daddy did with Occidental Petroleum and Armand Hammer). When Gore personally is using carbon, as when he flies in a carbon belching Gulfstream jet, one of his companies would pay some other guy not to fly or plant a tree or do something to offset Gore's carbon belching so that Gore can feel elated about himself and live as he wants.
Under the TRILLION DOLLAR Kyoto Protocol's trading scheme to determine the offset of emissions and the amount of CO2 that needs to be paid for will be controlled by the same organization that controlled the pittance BILLION DOLLAR Iraqi Food for Oil SCAM with Saddam, the anti-America/anti-capitalist
corrupt United Nations!!!
Socialist French President Jacques Chirac said in 2000 the UN’s Kyoto Protocol represented "the first component of an authentic global governance."
love your site!
Danny
Thanks for your honest advice.
jaime