JP Morgan acquires UK based ClimateCare

UPDATE 2- LONDON/NEW YORK, March 26 (Reuters) - JPMorgan has acquired the UK-based carbon offsetting company ClimateCare, the U.S. investment bank said on Wednesday.

Carbon offsetting allows countries and companies to fight climate change by paying for others to cut planet warming gases on their behalf, and is catching on among the public wanting to offset emissions voluntarily.

Investment banks including Citigroup , Morgan Stanley and Merrill Lynch have all recently bought stakes in developers of emissions-cutting projects but JPMorgan said it was the first case to buy a developer outright.

"We have a very healthy (offsets) pipeline both from the build-out of our own team and from ClimateCare, sufficient to match what we want to do in the next 12 to 18 months," said Bruce Tozer, global head of environmental markets.

JPMorgan declined to comment on the value of the deal or the amount of carbon offsets ClimateCare had developed.

Investment banks like carbon markets both to trade in these often volatile markets and to sell emissions permits and offsets to corporate clients facing voluntary or legally binding emissions targets.

BOOMING
Global carbon markets are booming, growing 80 percent to 40 billion euros ($62.94 billion) last year according to researchers Point Carbon, and that may continue because all remaining U.S. presidential candidates support a U.S. federal carbon trading market to match a European scheme.

But the European Union has said its demand for carbon offsets from developing countries, through a U.N.-run scheme under the Kyoto Protocol, depends on all countries agreeing a post-2012 successor to Kyoto in talks scheduled to end next year.

"(The EU) did increase uncertainty regarding post-2012 demand. It does potentially increase the risks on demand for CERs and ERUs," Tozer said, referring to U.N. jargon for offsets traded under the Kyoto scheme.

"The EU does strongly support purchases from less developed countries, and ClimateCare's presence in Africa plays into that," he added, referring to an EU proposal that new offset projects are only accepted from least developed countries after 2012.

ClimateCare has an office in Kenya and has been active in the unregulated voluntary carbon market worth about $400 million last year, and which has had its own critics because it operates outside rules under official government and U.N.-led schemes.

"We and ClimateCare have been actively involved in bringing greater transparency," said Tozer, referring to new voluntary carbon market standards.

JPMorgan said it had made the acquisition through its investment bank and that its environmental markets group would initially operate under the JPMorgan and ClimateCare brands.

In 2007, JPMorgan hired more than 50 new marketing, sales and trading professionals in commodities and would hire at least as many in 2008, the bank said. ClimateCare has 40 staff.
(Reporting by the New York Equities Desk and Gerard Wynn in London; editing by James Jukwey)

((gerard.wynn@reuters.com; +44 207 542 2302)) ($1=.6355 Euro)
Keywords: CARBON/JPMORGAN

Merrill Lynch and Societe Generale launch global carbon indexes

UPDATE 1- LONDON, Mar 26 (Reuters) -

U.S. investment bank Merrill Lynch and France's Societe Generale both launched global carbon indexes on Wednesday to track the international carbon markets, which were worth some $60 billion last year.

The indexes will allow investors to access the world's carbon markets, including the European Union's emissions trading scheme and carbon trading markets under the United Nations' Kyoto Protocol.

"The (Merrill Lynch indexes) come in response to strong demand from our institutional, asset management, and wealth management clients who seek exposure to the rapidly growing global carbon market," Abyd Karmali, managing director and global head of emissions markets at Merrill Lynch, said in a statement.

The European Union Allowances (EUAs) and U.N.-approved certified emissions reductions (CERs) are currently the most traded greenhouse gas credits, making up more than 99 percent of global market activity.

The research arm of Merrill Lynch said its MLCX Global CO2 Emissions Index will weigh EUAs and CERs at 71 percent and 29 percent respectively.

"The weightings of the new MLCX Global CO2 Emissions Index are based on liquidity of the underlying instruments, a crucially important element for investors looking to gain exposure to a new and fast-growing market," Francisco Blanch, Merrill Lynch's head of global commodities research Francisco Blanch, said.

Societe Generale's SGI-orbeo Carbon Credit Index, launched with joint-venture orbeo, will weigh the two types evenly.

SGI-orbeo is a joint venture between Societe Generale and chemicals group Rhodia .
(Reporting by Michael Szabo; Editing by Jane Merriman)

Four nations in race to be first to go carbon neutral

Iceland, New Zealand, Norway and Costa Rica are all hoping to turn their economies green, but the challenges they face are formidable
By Geoffrey Lean and Bryan KaySunday, 30 March 2008

It's the race for the greenest of the laurels, the contest for the ultimate ecological accolade. Four countries are competing to be the first of the world's 195 nations to go entirely carbon neutral.
They make a disparate line-up of runners, comprising the world's most northerly and southernmost independent countries, its third largest oil exporter, and a state that long ago dispensed with its army.

The starting pistol was fired last month in Monaco – better known for its gas-guzzling Grand Prix than for such a determined race in the other direction – at the annual meeting of the Governing Council of the United Nations Environment Programme.

Iceland, New Zealand, Norway and Costa Rica formally signed up to go zero carbon, joining the Climate Neutral Network launched at the meeting. Achim Steiner, UNEP's executive director, calls it "an idea whose time has come, driven by the urgent need to address climate change and the abundant economic opportunities emerging for those willing to embrace a transition to a green economy."

He spells out the diverse challenges facing each of the contenders. Norway's main issue, he said, was "emissions from oil and gas", whereas most of New Zealand's pollution came from agriculture. Iceland's "central challenge" was "transport and industry, including fishing", while Costa Rica faced the special circumstances of being a developing country.

In fact one UN member state already claims to have beaten then all. The Vatican announced last September that it was becoming the world's first – but is widely held to have cheated. It said that it was winning the prize by offsetting its entire emissions for 2007 though planting trees to restore an ancient forest in Hungary.

But critics say that the true champion will have to achieve carbon neutrality at home – and point out that the Holy See has failed to count the carbon emitted by its travelling officials, or emissions from its buildings outside the Vatican City.

All the main contenders get much of their energy from renewable sources. Iceland has gone the furthest, already achieving almost complete carbon neutrality in heating buildings and in electricity generation. Its greatest asset is disclosed in the name of its capital city, Reykjavik, which means "bay of smokes", referring to the plumes rising from its hot springs. Such geothermal energy now heats it and much of the rest of the country.

Only 1 per cent of its homes are heated by fossil fuels, and 99 per cent of its electricity is generated by geothermal and hydroelectric power. "But we have not entirely kicked our carbon habit", writes its Environment Minister, Thorunn Sveinbjarnardottir, in the forthcoming issue of UNEP's magazine, Our Planet.

"Our fishing fleets and our cars are still running on fossil fuels. Our car fleet is one of the biggest, per capita, in the world. And Icelanders tend to like big cars, as any visitor to our country will soon notice." The country will give people discounts to buy eco-friendly vehicles and fit fuel cells to fishing boats, aiming to reduce its relatively small national emissions of carbon dioxide by 75 per cent by 2050.

On the other side of the world, New Zealand's Prime Minister, Helen Clark, has already set her country the goal of being the world's first carbon-neutral country. It aims to generate 90 per cent of its energy from renewable sources by 2025, and to halve its transport emissions per head by 2040. But the country has a particular problem with agriculture, which accounts for half its emissions of greenhouse gases.

Norway has set an even more ambitious target, aiming for carbon neutrality by 2030, despite being the world's third largest oil exporter. It already gets 95 per cent of its electricity from hydroelectric power, and heavily taxes cars and fuel: a 4x4 costs four times as much as in the United States. And it is planning to capture and store carbon in old North Sea oil fields. But Frederic Hauge – the head of Bellona, the country's largest environment pressure group – is sceptical. "We are a nice little country of petroholics and that has made us lazy", he says.
On paper at least, the poorest of the four countries is in the lead – Costa Rica plans to reach its goal by 2021. It has just released a plan of action, which relies heavily on planting trees to soak up emissions. Last year it planted five million of them, a world record, and the banana industry – the country's largest exporter – has promised to go carbon neutral. However, its number of cars has increased more than five-fold in the past 20 years and its air traffic more than seven-fold in just six, making its task far harder.

Texas: Reliant stands to gain from forest preservation giftEffort provides useful practice in carbon trading

March 27, 2008, y TOM FOWLER
Copyright 2008 Houston Chronicle

Reliant Energy's $300,000 gift to help preserve coastal forests near Houston also will help the company get ready for a future fixture of the power business — carbon trading.

The donation to the U.S. Fish and Wildlife Service will buy more than 1,100 acres in an area known as the Columbia Bottomlands, which stretches across Brazoria, Matagorda, Fort Bend and Wharton counties. The area includes some of the largest remaining tracts of old-growth forests in the southern United States.

Under the deal, Reliant gets the rights to "carbon credits" that will be created by the forest's ability to draw up to 154,000 tons of the greenhouse gas carbon dioxide from the atmosphere.
While it has no immediate plans to sell the credits, Reliant can use them on one of the carbon markets now operating in the U.S. or in a future market that many expect will be created by federal climate change laws in the coming years.

"Our interest is less in the credits themselves than in the opportunity to learn how to do more projects like this and get familiar with carbon markets today and in the future," said Dave Freysinger, a senior vice president in charge of generation operations for Reliant.

Electricity retailing giantReliant is best known in Texas as the state's largest electric retailer, selling power generated by other companies to millions of customers. But it also owns and operates 16,000 megawatts of power plant capacity in nine other states. About 4,600 megawatts of that comes from coal-fired plants, which have the highest CO2 emissions among power plants. Reliant generates the rest with natural gas.

As the largest stationary sources of CO2, power producers likely will face the most direct effect from proposed federal legislation aimed at reducing greenhouse gas emissions.

The plan with the most support so far would set a cap on the amount of CO2 emissions a company is allowed per year and then reduce the cap over time. Companies could cut their emissions by shutting plants and improving technologies or develop projects that reduce CO2 in the atmosphere.

The largest CO2 credit trading market is a mandatory program in Europe launched several years ago under the Kyoto Protocol, an international climate treaty the U.S. did not sign, said Emilie Mazzacurati, a senior analyst with research firm PointCarbon.

Despite early problems, the market is running fairly well, she said, with about $60 billion in transactions per year.

The U.S. has several voluntary markets in place or starting up soon, Mazzacurati said, but they have relatively low carbon reduction goals.

"They're not very ambitious, so companies can reach the goals without too much effort," she said.

They're still useful to help companies get comfortable with creating and trading carbon offsets, however, as Houston-based Waste Management has discovered. The landfill operator is a charter member of the Chicago Climate Exchange, a marketplace created in 2002 to providing a framework for buying and selling carbon offsets.

"It provides a consistent set of rules and uses third-party verification of the offsets, which is important for buying and selling any commodity," said Kerry Kelly, director of federal public affairs at Waste Management.

The company captures methane — considered a more environmentally damaging greenhouse gas than CO2 — at 108 of its landfills and burns it to generate nearly 500 megawatts of power.
Through third-party certifications those projects create carbon credits the company trades on the Exchange.

Since the existing U.S. markets are voluntary, prices for carbon credits are generally lower than they're expected to be under any federal regulations. They have traded at $1 to $5 per ton, but studies have put the price at $20 to $50 per ton under laws proposed in Congress, Mazzacurati said.

Other preservation efforts

Reliant's work on the Columbia Bottomlands isn't its first such effort. In addition to more than a dozen nature and wildlife preservation projects around the country, in 2003 it paid $160,000 to plant 162,000 seedlings on land in Smith County, a project expected to help remove more than 200,000 tons of CO2 from the atmosphere.

Such projects don't absorb all that CO2 at once, but capture the gas over many years.
"You need to protect the land in perpetuity to let forests recover and allow carbon to be permanently removed from the atmosphere," said Mike Lange, a wildlife biologist with the U.S. Fish and Wildlife Service who has been working on preserving the Columbia Bottomlands. "It is easy to plant a tree, but for carbon sequestration to work, the land that tree is planted on must be protected permanently."

Investor buys Guyana forest's rain and carbon

Thu Mar 27, 2008 4:32pm GMT
LONDON (Reuters) - The British-based investment firm Canopy Capital said on Thursday it had bought a share in the rain-making potential of a chunk of Guyanan rainforest bigger than the Mediterranean island of Mallorca.

The move is a novel twist in an investor frenzy to make money from the prospect of climate change that has also seen businesses snap up permits to emit greenhouse gases and invest in low carbon-emitting technologies.

Perhaps more lucratively, the company has also bought rights to the carbon -- a heat-trapping gas when released into the atmosphere -- stored in the forest's timber.

Canopy Capital is betting that global climate talks due to end next year in Copenhagen will agree a successor to the Kyoto Protocol that includes a legal format for paying developing countries to preserve their forests.

Deforestation contributes 20 percent of total greenhouse gas emissions. Scientists say the effects of global warming could reduce rainfall, and make it more irregular.

"It's a new asset class," said Hylton Philipson, Canopy Capital's director and a former investment banker.

"If you fly over the forest, you can see there's no cloud coming off the cleared land."
"I think there's a real appetite out there (for this type of investment)," he said.
The company said it would fund a "meaningful" chunk of the $1.2 million annual management budget for the 371,000 hectare (917,000 acre) Iwokrama reserve.

Pressure is growing for tropical countries such as Indonesia to be able to sell carbon offsets to rich countries in return for not destroying their remaining forests and so prevent more carbon entering the atmosphere. The concept is known as "avoided deforestation".

Philipson hopes to sell the carbon storage and other rights at a profit within 18 months.
"I would seriously hope to put something together of real value between now and Copenhagen with appeal to the wider investment community," he said, adding that the reserve would receive 80 percent of any profit.

"There is a road planned from Manaus to Georgetown that goes slap through the reserve. If you can generate income from standing trees, maybe people won't chop them down."
(Reporting by Gerard Wynn; Editing by Kevin Liffey)

Air New Zealand Offers Carbon Offsets, Starts Environment Fund

By Gavin Evans
March 27 (Bloomberg) -- Air New Zealand Ltd., the nation's biggest carrier, is offering customers carbon credits to offset emissions from their travel and is investing in forest planting to reduce its own pollution.

Customers will be able to purchase credits, initially sourced from a New Zealand wind farm owned by TrustPower Ltd., Chief Executive Officer Rob Fyfe said in a statement e-mailed to Bloomberg today. The company will also fund a three-year tree planting program to help offset emissions from staff travel.

Air New Zealand promotes the country's clean environmental image to fill international services which account for about two-thirds of its revenue. It is buying fuel-efficient jetliners to cut emissions and fuel costs and will this year test biofuels in a joint study with Boeing Co. and Rolls-Royce Group Plc.

Customers ``will now be able to make a conscious choice about whether or not to take positive steps toward helping our environment,'' Fyfe said in the statement.

Offsetting emissions on a flight from Auckland to Wellington will cost NZ$4.50 ($3.60), rising to NZ$13.70 for a Christchurch to Sydney service and NZ$88.10 on an Auckland to Los Angeles trip, the airline said.

Customers can also donate to an environmental trust which the airline is underwriting with an initial NZ$450,000 donation and will support with ongoing contributions. the fund's first project is a native forest restoration on 100 acres of land on Mangarara Station in Hawke's Bay.

To contact the reporter on this story: Gavin Evans in Wellington at Gavinevans@bloomberg.net Last Updated: March 26, 2008 17:34 EDT

Possible carbon tariffs could have an impact on growth: report

Jacqueline Thorpe, National Post Published: Thursday, March 27, 2008


Tariffs on carbon emissions could shift manufacturing back to more efficient countries like Canada, say financial experts.

The West's next weapon in the fight against global warming may be a carbon tariff on imports from the developing world, a strategy that could have a profound impact on the global economy, a new report argues.

Not only will new charges for carbon emissions trim growth in developed countries, but carbon tariffs could boost inflation and reverse the march toward offshoring as manufacturers who have relocated to countries like China move to more energy-efficient environments back home, CIBC World Markets said in a report released yesterday.

"As OECD countries begin to tax their own economies by charging growing fees on carbon emissions, their tolerance for the carbon practices of their trading partners will diminish rapidly -- particularly when the painful cuts made by North America, Western Europe and a handful of other OECD countries are dwarfed by the emission trail spewing from China and the rest of the developing world," Jeff Rubin, chief economist at CIBC WM said the report with Benjamin Tal.

"The response is likely to involve a carbon tariff -- an equalizing force that will tax the implicit subsidies on the carbon content of imports that come from carbon non-compliant countries."

In an interview, Mr. Rubin said it looks increasingly likely the United States will join Europe in imposing a charge on carbon emissions either through a tax or a "cap and trade" system where companies are allowed to emit a certain amount of carbon but must pay to go over the limit.

"If you look at the McCain platform, the Obama platform or the Clinton platform, irrespective of who captures the White House, the next administration is going to impose a price on carbon," Mr. Rubin said.

That would be the precursor for the United States to attempt to impose a carbon tariff on developing world imports, he said. In effect, a carbon tariff would be similar to a countervailing trade duty, imposing a charge for unfair energy subsidies that Chinese exports reap from their cost-free carbon emissions, Mr. Rubin said.

At US$45 per tonne of CO2 -- about the going rate under current European trading schemes -- such a tariff would raise roughly US$55-billion a year from Chinese exports to the United States or equivalent to an average 17% tariff, almost six times bigger than the current 3% effective tariff on Chinese goods.

"At least initially, before other carbon compliant sourcing can be found, it will be U.S. consumers who will have to bear the bulk of the tariff burden in higher import prices," Mr. Rubin wrote. Based on China's share of U.S. imports alone, that would raise the annual U.S. consumer price index by more than 0.6 percentage points.

Canada would likely face a similar increase and costlier goods prices would hit growth as well.
Mr. Rubin estimates U.S. efforts themselves to curb emissions will shave 0.6 percentage points off growth in real gross domestic product per year for the next five years, and that is if emissions are only cut by 10%.

The inflationary impact may be mitigated however, if North American industries shift production back home, a trend Mr. Rubin fully expects to materialize as companies try to escape the tariff and improve their energy efficiency.

"Throw US$40-$50 per tonne carbon costs into an environment of triple-digit oil prices and you suddenly redefine the meaning of competitiveness," he wrote. "In a whole swath of manufacturing industries, ranging from chemicals to primary metals, energy costs and their carbon trail, not labour costs, will soon become key."

Ultimately, a carbon tariff could reverse current trade and offshoring patterns, Mr. Rubin said.
Mr. Rubin notes efforts to decarbonize in advance economies come as carbon emissions are skyrocketing in the developing world, particularly China, which relies heavily on coal for energy.
As of 2006, China surpassed the United States as the single largest carbon emitter in the world and today it already emits 9% more than the United States, accounting for over a fifth of global emission.

Breakneck economic growth and the absence of environmental emissions have been key drivers but in its manufacturing-intensive economy, energy use as a share of GDP is also four times greater than the services-based U.S. economy.

China is also not energy efficient, producing a third more CO2 emissions per unit of energy than the United States, largely because it relies on coal for two-thirds of its total energy needs.
"There are more coal plants in China today than there are in the United States, the U.K. and India combined," Mr. Rubin and Mr. Tal write. At is current rate of one new coal plant per week, it will see 30 more coal plants built before the "green" Olympic games this summer. Plans call for 560 new coal-fired generation plants by 2012.

"You can't have the OECD making a long-term commitment to decarbonize their economy and have the developing world...rapidly carbonize their economies," Mr. Rubin said. "It makes absolutely no sense. The savings the [OECD] makes on their own emmssions are going to be dwarfed by the rate of growth...in the developing world."