First up, Claire Jones at FT Alphaville:
What is the true cost of carbon emissions?
One of the many challenges facing attempts to green the economy is gauging an “acceptable” price for carbon emissions.....MUCH MORE
The German government, for instance, was met with criticism from both sides when it said last week that it would price emissions at €10 per tonne under a new certificate scheme beginning in 2021 (with the figure rising to €35 by 2025).
So in the interests of transparency, it is helpful that data firm IHS Markit has put together what it claims is the first global benchmark for carbon emissions pricing. (There’s a news story here from our colleague Nikou Asgari.)
The benchmark, which it plans to calculate daily, launches today using carbon prices based on trading under the three most liquid trading schemes: the EU’s, and two from the US. It uses data going back to 2014 and here is what it looks like at the moment, the weighted average cost of a tonne of carbon coming in at $23.65 today -- or about double what the government in Berlin wants to charge:...
***... IHS Markit says they plan to add other carbon credit trading schemes once new markets become deep and liquid enough. All of which ought to help governments, and the public, assess what’s a fair price.
The problem is -- as IHS Markit pointed out to us -- that the World Bank thinks the current price is far lower than it ought to be.
So why is the market getting it wrong?...
And from BlackRock's blog:
Introducing Carbon Beta: What pricing carbon means for investors
For the first time ever, BlackRock is enabling all portfolio managers to stress test their portfolios to future carbon price scenarios. Andre and Mike explain why.Investors already know that the transition to a low-carbon economy matters to their portfolios. But measuring how it matters has been incredibly difficult – until now. In order to answer this pressing question, BlackRock Sustainable Investing has developed a new cutting-edge investment metric called Carbon Beta. Simply put, it’s a way of measuring a company’s sensitivity to carbon prices.
Carbon Beta, which is integrated into our risk and investment management technology Aladdin, is designed to help investors better understand the energy transition. Using Carbon Beta, every portfolio manager at BlackRock can review the impact of future carbon price scenarios on their investment portfolios. This enables us to better understand the risks and opportunities of carbon pricing and deliver our clients solutions aligned with the low-carbon transition.
Carbon pricing gains traction
Why is this metric so urgent for investors? Because carbon pricing mechanisms—such as carbon taxes and emissions trading schemes—have taken center stage in the global policy debate. In order to manage risk and achieve out-performance, investors need to understand the different ways in which carbon pricing policies—and carbon prices more generally—could affect their portfolios.
The idea of pricing carbon and allowing market forces to reduce overall emissions is not a new one. In fact, 57 carbon pricing initiatives are now in effect or scheduled for implementation globally, up from 51 in April 2018. These initiatives currently cover around 20% of global greenhouse gases, more than five times what was covered in 2010. See chart below.
Despite the overall growth in interest, many jurisdictions have yet to take action, and both the amount and set price of emissions covered are still too low to meet the objectives of the Paris Climate Accord. In light of the United Nation’s warning last year–that without dramatic new limits on emissions, global temperature increases in the next decade could produce alarming rates of food scarcity, mass migrations, and instability as soon as 2040–more regulatory attention is warranted.....MORE
Anticipating increased carbon pricing activity, some financial institutions and emissions-intensive industries are starting to apply internal carbon pricing in their investment decisions, consistent with risk guidelines provided by the Financial Stability Board’s Task Force on Climate Related Financial Disclosure. This summer, BlackRock and a group of global energy CEOs —including representation from ExxonMobil, BP, Royal Dutch Shell, Total, Chevron and Eni—joined the Pope at the Vatican in calling for economically meaningful prices to carbon to address global climate change. Due to these underlying forces, we anticipate more carbon pricing regulation to be implemented in coming years.
Introducing BlackRock Carbon Beta
To help BlackRock’s portfolio managers better understand the implications of regulation, we introduced Carbon Beta, a new approach quantifying a company’s sensitivity to carbon prices....
Here's a 2009 post;
Climateer Investing on Carbon Trading and Traders
The post immediately below, "Richard Sandor, Barack Obama and the Founding of the Chicago Climate Exchange (CLE.L)" got me to thinking about the carbon markets.
Proponents repeat the mantra that cap-and-trade is a "market based 'solution'". This is, of course, nonsense.
Just as an economist using the tools of science (mathematics) doesn't make economics a science, carbon traders using the tools of markets doesn't make carbon trading market based.
The carbon markets are an entirely artificial construct, beholden to political paymasters for their very existence. Which may be why so many political types are planning to profit from them.
Directly, think Al Gore's Generation Investment Management's investment in carbon project developer Camco or Lord Nicholas Stern's Vice-Chairmanship of IDEACarbon's parent IDEAGlobal or indirectly as a source of campaign contributions for pols still in office, or an unaccountable slush fund in the case of the U.N.
The word artificial led me to think of it's cousin, artifice. Here's the Oxford Pocket definition:ar·ti·ficen. clever or cunning devices or expedients, esp. as used to trick or deceive others: artifice and outright fakery.
The securities attorneys among our readers will recognize the word from the common state security law usage "...employ any device, scheme, or artifice to defraud".
Coincidence?Here's the view from Russia, quoted in The Bored Whore of Kyoto:
"I don't know if climate change is caused by burning coal or sun flares or what," said the Moscow-based carbon cowboy. "And I don't really give a shit. Russia is the most energy inefficient country around, and carbon is the most volatile market ever. There's a lot of opportunity to make money."Here's a former Goldman Sachs trader:
The whole reason for the existence of traders is to make as much money as possible, consistent with what's legal...I lived through this: if you didn't manipulate the market and manipulation was accessible to you, that's when you were yelled at.Here's Lord Stern at the Bali Climate Conference where the largest NGO contingent were the gang from the International Emissions Trading Association, 336 representatives including lawyers, financiers, emissions traders, consultants, certifiers and emissions trading experts... the IETA made up 7.5% of the 4483 Non-Governmental Organisation (NGO) delegates registered for the U.N. shindig:
-Former Goldman Sachs trader
New York Times, May 8, 2002
“Bali will set in motion a process that will define the structure
of the carbon markets for decades to come”
“By 2020 the global carbon market could be worth EUR 240-
450 billion”
-Sir Nicholas Stern
"This (climate change) is much too important to leave to environment ministers"And here's a post from 2007:
-Sir Nicholas Stern
to Finance Ministers basking in Bali
"When Britain decided to end slavery,
Wilberforce didn't set up a cap-and-trade system"
That's me, misquoting myself.
Sometimes I find my fellow capitalists repulsive. When they lobby for political favors, then turn around and blandly refer to the result as an example of free markets I don't know whether to laugh, cry or attempt to destroy them. Laughing is probably the healthiest response, world domination the most challenging.
I've been looking for examples to skewer CO2 cap-and-trade.
One thought problem was how to end slavery.
Another was Nuclear weapons proliferation. Think about it.
Mr. Consultant comes up to you and says "The market based system of capping production and handing out allowances to produce nukes, which can then be traded, is the only rational approach".
Don't think too long though, lest you enter "Le Théâtre de l'Absurde". Trust me, the world of Jean Genet and Sam Beckett gets old fast, Pinter and Albee's, faster....One more. 2011, "Zeitgeist: 2/3 Support Revenue Neutral Carbon Tax As Pew Trusts Pull Funding for Pew Climate Center"
