Bank of America prices carbon at $20-40

BofA CEO calls on U.S. Congress to create cap-and-trade system; announces new team to focus on projects supporting a green economy
Feb 12, 2008 — Associated PressBy IEVA M. AUGSTUMS
Forestweb rewrites headlines for editorial clarity. The original story and headline begin below.
Original Headline: BofA CEO calls for carbon trading
RALEIGH, N.C., February 12, 2008 (Associated Press) — Private investors alone can't spur an environmentally friendly "green economy," Bank of America Corp. chief executive Ken Lewis said Tuesday, as he called on Congress to create a cap-and-trade system to help control carbon emissions.
Such a cap-and-trade system would allow businesses to buy and sell emissions credits -- selling extra allowances if they come in under a carbon emission quota, and buying them if exceed the cap. It was one of several suggestions Lewis made to policy makers in a speech at the Institute for Emerging Issues forum, held at North Carolina State University in Raleigh.
"We favor a market based mechanism to set a value for carbon allowances, and a clear, federal standard that would give investors the certainty they need to plan for the future," Lewis said.
The two-day conference, attended by General Electric Co. chairman and chief executive Jeff Immelt and Duke Energy Corp. CEO Jim Rogers, among others, focused on the development of alternative fuels and conservation efforts that will create jobs and reduce the pollution blamed for global warming.
"Like any large, important, transformative project, this one is going to require a lot of money," Lewis said. "I'm guessing that's why you invited me."
Along with the cap-and-trade system, Lewis said policy makers must determine what kind of environmental incentives and regulations work best at the state level, which would help avoid a patchwork of inconsistent regulation. The private capital market also needs "a stable and predictable regulatory environment with a bias toward clean energy and the green economy," he said.
"When innovators and financial backers are confident of government support, risk calculations change and good things happen," he said.
Last year, Bank of America joined the Chicago Climate Exchange, a private trading market for greenhouse gases and the only one operating in North America. The European Union established the first trading system under the Kyoto Protocol, the emissions-reduction agreement rejected by the U.S., and Lewis said that Europeans are "way ahead of us in developing these markets."
"We have decided, as have other banks, to start assessing the cost of carbon in our risk and underwriting processes," Lewis said.
Without federal legislation setting that cost, Lewis told the crowd of business and government leaders that Bank of America puts it at between $20 to $40 per ton of carbon dioxide.
Last March, Bank of America launched a $20 billion initiative to help its customers support the growth of environmentally friendly activities and to reduce global warming. On Tuesday, he said Bank of America had created a team whose sole focus will be to identify and finance projects that support a green economy and address the nation's environmental challenges.
"There are a lot of great ideas out there," Lewis said. "This fact creates a huge risk management challenge for banks ... as a financial backer of new technologies, the bank is in the position of picking winners and losers."