Carbon Capitalists Warming to Climate Market Using Derivatives

[phantom power]

Banksters inserting themselves into a cap and trade market... what could possibly go wrong?
:eyes:

Banks intend to become the intermediaries in this fledgling market. Although U.S. carbon legislation may not pass for a year or more, Wall Street has already spent hundreds of millions of dollars hiring lobbyists and making deals with companies that can supply them with “carbon offsets” to sell to clients.

JPMorgan, for instance, purchased ClimateCare in early 2008 for an undisclosed sum. This month, it paid $210 million for Eco-Securities Group Plc, the biggest developer of projects used to generate credits offsetting government-regulated carbon emissions. Financial institutions have also been investing in alternative energy, such as wind and solar power, and lending to clean-technology entrepreneurs.

The banks are preparing to do with carbon what they’ve done before: design and market derivatives contracts that will help client companies hedge their price risk over the long term. They’re also ready to sell carbon-related financial products to outside investors.

Masters says banks must be allowed to lead the way if a mandatory carbon-trading system is going to help save the planet at the lowest possible cost. And derivatives related to carbon must be part of the mix, she says. Derivatives are securities whose value is derived from the value of an underlying commodity -- in this case, CO2 and other greenhouse gases.

http://www.bloomberg.com/apps/news?pid=20601072&sid=aXRBOxU5KT5M

[kestrel91316]

1. So - what's YOUR plan for solving the global warming problem?

(crickets chirping)

I thought so.

[phantom power]

2. I favor increasing taxes on fossil fuels.

No markets to be gamed by the financial wizards who crashed our economy, you see.

[joshcryer]

11. Fee and dividend.

Politically impossible. But one can dream.

[kristopher]

12. And what is your plan B?

Since the powers that own carbon are strong enough to prevent the imposition of a straight carbon tax, something we all agree is best, what do we then do, nothing?

[phantom power]

14. I don't really know. If the Wall Street Gang turns this into just another ponzi scheme...

for themselves to play with, and corrupts it to the point where no actual emissions reductions take place, it might actually be the case that Doing Nothing was the better option.

It leaves a bad taste in my mouth to propose that Nothing Can Be Done. In fact, it's not that I actually think nothing can be done, but I do think that our current political infrastructure has reached a level of disfunctionality such that no politically achievable solution is defensible from being so bastardized by the lobbies who wield most of the political influence that it can't turn out worse than our already-lousy status quo.

That was a horrific run-on sentence. I bet the parse tree on that sentence is fractal to at least three layers of recursion. But I'm going to go with it.

I feel like I'm seeing this same basic theme play out on economic stimulus, health care reform, the environment and our splendid middle east "police actions." Effective solutions are neutered, at best. At worst, they are corrupted and subverted.

[kristopher]

15. Did you read the piece by Jared Diamond "Will Big Business Save the Earth?"

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x7171028

When Obama speaks of being "post partisan" what I take away from the discussion is that the left/right ideological paradigm actually represents antiquated competing economic perspectives. One side says profit is bad, the other side says government is bad.

These positions were staked out long ago and are based on limited analysis and lots of anecdotal evidence accumulated in a process dedicated to fulfilling confirmation bias.

In the past 30 years we've at least progressed to the point where we can and have analyzed policies and quantify the outcomes of the various approaches. What we've learned is that both sides are correct. Profit is bad at reflecting the majority ethical and value judgments of human societies, but it is a great tool of motivation. Government is bad as a tool of executing most policies where the wheels hit the road, but it is essential for ensuring the values and ideals of the public are being used to guide the overall direction of a society.

It is *possible* to design policies that have the best of both, and I think we are going to see some progress in aligning the goals of business with the values of a democratically organized social order. We are coming out of a collapse brought on by extremes no less drastic than what the Soviet empire represented at the other end of the spectrum. We are just going to have to work hard to make a difference with the tools we have.

The alternative is just to give up, and I'm not willing to go there.

[MH1]

3. I share your concern, however, what could go right is

that with powerful players seeing profit potential, there is more likely to be SOME action taken in the relatively near future. If we wait for good sense and altruism, it will be too late (acknowledging that in some sense, it already is "too late").

[GliderGuider]

4. False dichotomy

Your argument incorporates a fallacy known as "false dichotomy" or "either-or". The options are not just "cap and trade or wait for altruism". There are other options such as carbon taxes (which I support, BTW).

And yes, it's too late.

[MH1]

5. How will proposing a carbon tax engage the greedy powerful to get behind it?

If that worked wouldn't it already be done, or at least in process?

Anyway I thought carbon tax was deader than dead in the US political reality.

(please note I am not adressing here what I think would be best, I am talking about what can actually get through our lame system.)

[GliderGuider]

6. It won't. It would attack the problem of carbon consumption.

It would need to be done against the wishes of the greedy and powerful. There is no effective mechanism that will engage the greedy and powerful, because such a mechanism would axiomatically work against their perceived interests.

There is nothing that can get through your lame system that will help.

Not every political problem has a political solution.

[MH1]

7. How do you propose to get such a tax implemented?

Overthrow the lame political system?

As to "There is no effective mechanism that will engage the greedy and powerful, because such a mechanism would axiomatically work against their perceived interests." - then I suggest we change their perception of their interests.

[GliderGuider]

8. How do you propose to change their perception of their interests?

I'm not in favour of overthrow. Especially when all we have to do is wait for a bit. I think the US political system as currently constituted has a shelf life of less than 15 years. What replaces it is up to the citizens to prepare.

[MH1]

9. Show them how they can profit by better behavior.

I don't really like the idea of waiting 15 years (plus or minus) and then see what kind of lame system replaces the current lame system, before taking any action.

[GliderGuider]

10. No problem.

The cool thing about this situation is we all get to advocate and work on the things we support.

I personally don't think that "they" are open to that kind of persuation. They have a formula that works right now, and they don't need to waste any time at night thinking of ways to be nice to people who don't count (i.e. us). Some good people will start ethical green companies, but trying to convince the CEO (and shareholders) of Exxon to stop promoting the use of fossil fuels is a fool's errand. And its the boards of directors or the Exxons of this world that own presidents and congresscritters, not the BoD's of wind farms.

[unabelladonna]

13. from the same thugs who brought us the financial collapse

this is what cap and trade is all about...a way for the thieves to make zillions and for us peasants to be robbed (by having higher energy bills). this must be stopped.