Climate Bills and a Green Economy

European Climate Exchange Chief Patrick Birley Defends the Carbon Trading System

November 29, 2009

Telegraph - "Why should it be different as a commodity to the way people trade oil or gas?"

As the man in charge of the world's biggest exchange for companies, banks and hedge funds to trade permits to emit carbon dioxide, Birley is fed up with the environmentalists' charge that dirty capitalists should not profit from the global effort to tackle climate change.

Ahead of the Copenhagen summit next week, campaigners such as Friends of the Earth have argued that the entire system is so flawed it may need to be demolished in favour of a straightforward tax on polluters.

Firstly, they insist, the European system has failed in its fundamental aim to reduce emissions, meaning its only effect is to redistribute wealth among companies and traders. Secondly, the market is a magnet for derivatives that few people understand, brewing up a second sub-prime bubble. Lastly, the opportunities for fraud are vast, given the intangible nature of the product. .

These well-worn concerns are resurfacing as the whole concept of carbon trading stands at a crossroads. This totally invented $126bn (£76bn) market has the potential to flare into a $2 trillion green giant over the next decade, if US President Obama manages to push his carbon trading bill through the Senate early next year.

The Commodities and Futures Trading Commission even believes that within five years, carbon could surpass crude oil as the world's most traded commodity. Mr Birley is the first to admit that the European system "hasn't actually reduced emissions" so far. But having run exchanges throughout his career, he has faith in the ability of the market to deliver in its own good time.

"The goal of the system is reducing emissions: why should it matter how we get there?" he asks.

With weariness, he debunks the idea that policymakers can control who makes money from reducing emissions. The point of a market mechanism is that the market decides.

"Carbon-related products are probably the most profitable part of trading for any of the investment banks right now, because the margins are so good," Mr Birley admits. "Because it's such a specialist area, a little bit of knowledge goes a very long way."

Part of what makes the profits potentially so high are the price swings. Currently carbon is 20pc more volatile than oil, meaning utilities need the banks to help shoulder some of the risk associated with trading and provide liquidity...

The carbon trading system is expected to add £40 to household energy bills when the carbon price reaches €35 per tonne – but the cost to businesses could be even more crippling...

Architects of the US cap-and-trade system argue that there is time to iron out practical problems, but the concern remains that after almost half a decade of carbon trading in Europe, incentives still are not reaching those with a genuine commitment to reducing emissions.

While banks and hedge funds have created new businesses from their carbon trading desks, coal producers and heavy industry have banked billions in windfall profits. Meanwhile, utility companies complain that it is still cheaper to build a gas-fired power station than a wind farm or nuclear plant...

Forest Carbon Scheme Hopes for Green Light in Copenhagen

December 1, 2009

Reuters - While nations bicker over the size of emissions cuts and climate funds, saving forests has turned out to be among the least contentious issues in U.N. climate talks and has achieved the most progress.

The reason, analysts and the world body say, is that curbing deforestation is an easy win for the climate and most countries support a U.N. scheme that aims to reward developing nations for protecting their remaining forests.

That bodes well for major U.N. climate talks that start next Monday in Copenhagen, where the scheme, called reduced emissions from deforestation and degradation (REDD), is likely to make further progress, though a number of issues need to be resolved.

Investors such as banks and some rich nations are pushing for REDD to be a success, potentially ushering in a carbon trading scheme from 2013 that could be worth billions of dollars a year.

"If anything is going to be delivered at Copenhagen it's going to be REDD," said Paul Winn, forest and climate campaigner for Greenpeace Australia.

"That is because we are looking at a huge global emissions source. There is also the recognition that it is a relatively cheap, easy form of emissions reductions," he told Reuters...

Financing for REDD was not a problem, he said.

"Developed countries are at the door with the funding and the capacity-building and support and they just want to make sure certain things are met," he said.

Bigger problems were trying to finalize which institutions would manage the cash, how to ensure developing nations had a say in how to use the money, and the extent of the market's role in providing some or eventually all of the funds...

Australia Carbon Laws in Doubt, Election Possible

December 1, 2009

Reuters - The Australian government's plans to cut carbon emissions were headed for defeat in a hostile Senate after the elevation of a new opposition leader opposed to carbon trade laws, setting a trigger for an early 2010 election.

Prime Minister Kevin Rudd, who met President Barack Obama on Monday in Washington, wants to take a lead role at next week's Copenhagen climate change summit by enacting a "cap-and-trade" scheme requiring polluters to buy permits for their emissions.

However, new Liberal opposition leader Tony Abbott said after his party-room election on Tuesday conservative senators, many of them climate change skeptics, would reject Rudd's emissions trading laws if they were not deferred until early 2010.

Abbott said he believed in climate change but told reporters he was opposed to the government's emissions trading scheme (ETS) model, the biggest economic policy change in modern Australian history, and was not afraid to fight an election on the issue.

Assistant Climate Change Minister Greg Combet said the government would still push for its carbon trade laws to be passed this week, and said he hoped some opposition lawmakers would side with the government and defy Abbott.

"The extremists have gained control of the Liberal Party. They are opposed to taking action on climate change, they dispute the science," Combet told reporters.

Rudd has struggled to have his climate change bill passed in the upper house Senate before parliament adjourns until February.

He wants emissions trading to start in Australia in July 2011, covering 75 percent of emissions in the developed world's bigger per capita emitter. The planned carbon trade scheme would be the biggest outside Europe.

The United States is watching Australia's debate closely. A political agreement on carbon trading in Australia would help garner support for action from other countries.

If the Senate ends up rejecting the carbon scheme for a second time, Rudd will have a trigger to call an early 2010 election on climate change, most likely for March or April. Polls suggest his government would win an increased majority. If Rudd wins a so-called double dissolution election of both houses of parliament, he could then push his climate policy through a special joint sitting of the lower and upper houses...

"Mad Monk" Australia Opposition Head to Fight CO2 Laws

November 30, 2009

Reuters - Australia's new conservative opposition leader, Tony Abbott, is nicknamed the "Mad Monk" and once flirted with the priesthood, but his crusade against the government's emissions trade plan has been anything but madcap.

A pugnacious and socially conservative Catholic who has fought everything from attempts to make Australia a republic to embryonic stem cell research and same-sex marriages, Abbott was elected opposition leader on Tuesday in a surprise win.

His election over former investment banker and party moderate Malcolm Turnbull means the conservatives have reversed support for Prime Minister Kevin Rudd's emissions scheme and have likely ensured its defeat in an obstructive upper house later this week.

"This is a A$120 billion ($110 billion) tax on the Australian public. We can't just waive that through the parliament. It would be grossly irresponsible of us," Abbott told journalists after his victory on Tuesday.

Elections are due in late 2010.

However, Abbott has now changed his position on the carbon trade scheme three times in recent months. He says he is not a climate skeptic and believes humans have contributed to global warming...