Banks Say In Talks To Shape US Climate Policy
Date: 03-Mar-08
Country: UK
Author: Gerard Wynn
The main idea of any climate change regime is to put a price on carbon emissions, for example with a carbon tax, or subsidise alternative, low carbon-emitting energy technologies like solar power, or both.
The European Union leads the world in national policies to curb greenhouse gas emissions with its emissions trading scheme, but the United States is expected to table its only federal policies under a new US administration to succeed President George W. Bush from 2009.
Bankers are getting excited about a US carbon market which would impact the profitability of energy-intensive companies and potentially swell the revenues of banks' trading floors.
"That's why banks are investing (in carbon markets)," said Bruce Tozer, global head of environmental markets at JP Morgan.
"This could be completely ubiquitous in banking...in pension fund valuations, M&A," he said on the sidelines of a clean energy conference in London, organised by research group New Energy Finance.
A carbon market works by setting an overall cap on emissions of planet-warming greenohuse gases but allowing companies to trade emissions permits among themselves.
The US Congress is considering several bills that aim to launch a similar, federal US cap-and-trade market to the European scheme, that would reward industries for cutting emissions.
"The smart money is absolutely betting on a regulatory change in the United States," said John Cavalier, vice chairman of investment banking and chairman of global energy at Credit Suisse.
"Both parties (Democrat and Republican candidates) will be putting a price on carbon."
JP Morgan's Tozer added: "We're actively involved with our public affairs people, alongside other banks, trying to shape the regulatory regime."
The tighter the cap in an emissions trading scheme the shorter the supply of emissions permits and the higher the carbon price.
One of the key debates in the United States is what level of carbon price is appropriate, with the most affected industry favouring lower prices and perhaps a government-imposed price ceiling, and traders preferring zero intervention.
"For the first time there's an open dialogue, for example regarding a price cap versus an open market," said Cavalier.
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29Feb08 16:23 GMT
Source RTRS Reuters News
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