12 September 2006David Robertson
Climate Change Capital (CCC), the boutique “green” investment bank, has raised nearly $1 billion (£537 million) to start trading in carbon dioxide emissions.
In an indication of how well eco-capitalism is thriving, CCC has raised money from two of the world’s top five pension funds and also from Centrica, the British energy supplier.
It will start to invest funds in companies based in developing nations and will use Western technology to improve their manufacturing operations, cutting carbon dioxide emissions.
These carbon gains, or credits, will be sold to European companies that are struggling to meet their own CO2 emission-reduction targets.
CCC was set up three years ago by James Cameron, one of the negotiators responsible for the Kyoto Protocol. As well as the $1 billion for trading carbon credits, CCC has raised £37 million in Britain to invest in companies developing “green” technologies. Two of its biggest investors are the Dutch pension funds ABP and PGGM.
The carbon business is booming as public opinion, governments and corporations support efforts to cut emissions.
Signatories to the Kyoto Treaty have set emission targets for companies under their jurisdiction and the penalty for missing these targets can be steep. This has given rise to a thriving carbon trading industry, in which companies that meet their targets can sell excess CO2 tonnage to those struggling to do so.
According to Point Carbon, the analyst, the total amount of carbon traded last year was 799 million tonnes, worth €9.4 billion (£6.4 billion). In the first half of 2006, 684 million tonnes, worth €12 billion, were traded.
CCC’s Carbon Fund will make use of the clean development mechanism (CDM) in the Kyoto Treaty to trade gains made in developing countries to Western countries.
This form of carbon trading is embryonic and CCC announced the largest deal to date yesterday. It will invest in the carbon credits generated by Zhejiang Juhua, a Chinese chemicals company.
The company produces refrigerant and allows damaging by-products to escape into the atmosphere. By incinerating the by-product instead, the company will cut 29.5 million tonnes of carbon dioxide equivalent emissions over six years.
James Cameron, CCC’s vice-president. said: “What is happening in these markets is the creation of environmental value. The deals being done will mean large volumes of greenhouse gasses are being taken out by using the capitalist system.”
Andreas Arvanitakis, an analyst with Point Carbon, said: “The purpose of emission trading is to allow businesses to find the cheapest way to meet targets imposed by governments.”
Centrica, the owner of British Gas, produced 6.4 million tonnes of CO2 last year. Access to CCC’s credits will mean that it does not have to buy extra carbon in the open market.
http://business.timesonline.co.uk/article/0,,9063-2353210,00.html
