Big Picture Carbon Commodities Climate Change

Banking on China

The Circle Line can get a bit stifling in the evening. Not as much as the Central Line, which is often only a few tiers from the fires of Hell itself, but the Circle Line is often clammy in Summer, long after the Rush Hour home. Global Warming ? Global Steamy Clammy Heat !

So, I’m trying to maintain my personal cool and composure on the London Underground by not moving very much and reading a self-styled “pamphlet” I acquired at the 5th June 2009 conference “The politics of climate change : from economic crisis to business revolution”.

The booklet is called “Building a low carbon future”, and right after the preamble, on Page 7, where it is introducing key players in the Policy Network (who hosted the show), my political radar is pinged.

“Foresight is an international programme of investigation and debate structured around the challenge of forging common futures in a multi-polar world, organised by the Alfred Herrhausen Society, the international forum of Deutsche Bank…”

I reach for my sharpened pencil and underline this straight away. My question is, “what role do the Banks have to play in guiding policy on climate change ? What rights do they have to set direction ?” Poor little innocent me. Sometimes I ignore the Banks, those charnel houses of tunnelling, channelling capital.

I say “tunnelling” in the strict Quantum sense : that fact of Nature that allows outcomes that seem impossible working from a strictly process understanding of matter, as atomised : “the weird quantum process by which a quantum particle passes through a potential barrier that a classical particle could not traverse.” (Technology Review, “New Kind of Quantum Tunneling Experiment Goes Live”, 5th June 2009)

By the time I reach Page 17 of the booklet, the number of underlinings and question marks and exclamation marks and notes in the margins is reaching turmoil density. And then I read this :-

“Building a lasting consensus for a low-carbon future…Business requires more investment certainty if private capital is to be tapped and technological innovation promoted. An economic framework should be established that signals a predictable and significantly rising price for carbon that incentivises long-term private investment in carbon reduction. The pioneering EU ETS has so far not succeeded in this objective and needs to be strengthened either by introducing an EU-wide reserve price in carbon auctions or a complementary carbon tax.”

Now my internal alarm bells are ringing like the fire crew on their speedy way to a major uptown blaze. For what does that word “investment” mean ? Investment, in normal language, is a process where people use their time, labour, knowledge, skills, money or other assets to make something good happen in the future. Education, giving money to good causes, childrearing, nursing, building a low carbon home in your community, or a communal compost toilet – all these are true investment. You neither seek nor demand a financial benefit for yourself. Real investment is philanthropic.

Contrast this to the meaning of “investment” commonly used by Economists : a process whereby people and businesses use their saved money and other assets to put into a project that will guarantee income returned to them. Classic examples of economic investment include lending money at interest, building a supermarket in a deprived neighbourhood, running a large electronics firm, building a tuna cannery in a poor African country, selling GM crop seed to Indian farmers.

And what, pray, does the expression “private capital” mean ? Money is not a static object that sits in vaults. It only has a value when it is working, participating as the medium of exchange in trades of all kinds. It does not need to be “tapped”, it is already flowing, and is brokered and mediated by the Banks.

What does “incentivise” mean in the context of “rising price for carbon that incentivises long-term private investment in carbon reduction” ? It means, to my mind, a cross between a payment and a regulation. It could include a kind of sweetener, subsidy or kickback, to hopefully direct the spending of those with “private capital” towards de-Carbonising the Fossil Fuel-dependent World. It is also going to consist of the hanging sword of regulation, legislation, legally enforceable expectation of confomity.

But what form will “incentivisation” take ?

Here we have a clue :-

China Attacks Kyoto Carbon Trading With Greenpeace Approval

By Mathew Carr

June 19 (Bloomberg) — The market for trading rights to spew carbon dioxide, created by the 1997 Kyoto Protocol to reduce global warming, is under attack by developing countries and environmentalists as negotiators hammer out a sequel treaty.

Investors who trade pollution permits are fighting proposals to limit or kill a United Nations program that lets European companies offset requirements to cut emissions by bankrolling low-carbon projects in emerging economies. The process creates allowances that the World Bank says accounted for 26 percent of the $126 billion of credits that traded in the carbon market in 2008.

China and Mexico want wealthier governments to subsidize clean-up projects directly, with the Chinese saying investments from Western companies should “not be used to offset” their own cuts. Greenpeace International says the UN system delays rich nations’ response to greenhouse gasses. Their approaches would reduce the private sector’s role in, and potential profits from, the global-warming fight. Ending offsets would limit trading to permits that European Union governments issue under a related regime that makes up 73 percent of the market.

“There is a growing fear that the whole low-carbon investment scene is being positioned toward the public sector,” said Henry Derwent, president of the Geneva-based International Emissions Trading Association. “The public sector has no more than a tiny percentage of the money needed to solve the climate problem,” said Derwent, Tony Blair’s climate adviser when he was U.K. prime minister.

Wall Street Lobby

The lobby — which includes Goldman Sachs Group Inc., Morgan Stanley, Barclays Plc, JPMorgan Chase & Co. and 168 other firms — argues that climate change can’t be solved without a profit-driven market…

The Deutsche Bank is trying to position itself as “one of the good guys”, with a Carbon Counter in central New York :-

“This morning, near Madison Square Garden and just a few blocks from the national debt counter, Deutsche Bank unveiled a huge digital counter that tracks greenhouse gases in the atmosphere. The bright red numbers kicked off at 3.6 trillion metric tons, and whirl by adding an extra 800 tons every second. You can even download a counter “widget” for your computer. One the one hand, Deutsche Bank’s new counter is just the latest effort to slap a single, easily identifible number on the climate challenge—the counter’s website, in fact, is”

But they are lobbying for Cap and Trade for their own profit, to be sure, alongside the other investment banks :-–lobby/bill-on-climate-change-offers-hope-to-wall-st.-2009-05-20.html

“At the heart of the 900-plus-page climate change bill that the White House and House Democrats have rallied around is a massive new dose of confidence in markets. Some critics say the bill may create a “carbon bubble” that could leave unsuspecting investors holding worthless assets and ultimately undermine efforts to reduce greenhouse gas emissions. The so-called “cap-and-trade” program seeks to curb emissions such as carbon dioxide by allowing utilities and other emitters to buy and sell emissions credits as needed. It’s the trading of those pollution allowances and the creation of financial instruments, or derivatives, to hedge risk in the market that has bankers and traders interested…Among the financial firms lobbying on the issue this year are: Zurich Financial, Chicago Mercantile Exchange Corp., JPMorgan Chase & Co., the Reinsurance Association of America, Swiss Re, Deutsche Bank, UBS America and the International Swaps and Derivatives Association…”

Ah, J. P. Morgan once more. Didn’t I hear a lot about Carbon Offsetting just a few weeks ago at J. P. Morgan Climate Care’s bash with the excellent but tiny nibbles ? And does not Tony Blair receive some kind of executive function payment from J. P. Morgan ? And is not Tony Blair some kind of global missionary or “Green Saint” on Climate Change mitigation ?

It really doesn’t matter what the Copenhagen Treaty looks like. The atmosphere has already been carved up, and will be sold to the highest, wealthiest bidders.

Here’s what’s going on :-

“Bluenext signs Chinese carbon credit deal – Financial Times : June 18th, 2009 : By Kathrin Hille in Beijing : Bluenext, Europe’s largest carbon credit exchange, and China Beijing Environmental Exchange (CBEEX) set the cornerstone for an international trading platform for Chinese carbon emission credits on Thursday with an agreement …”

Which Banks figure as “members” of Bluenext ?

I think that the Banks aim to own China, from the inside out. This is perhaps why China is resisting. This is perhaps why China is always so on the edge about playing ball at the United Nations Climate talks.

With so much riding on the sealing of the Cap-and-Trade deals around the world, I can confidently predict that the Banks will be making very loud noises about how good Cap-and-Trade is, in all sectors and all media.

My conclusion is : it’s not the negotiations between countries we need to be focusing on, but the deals being brokered by the Banks.

My opinion is : it’s time to take our money, our investment, out of the Carbon Traders and put it into something where it will do some real long-term good, even if we don’t personally get rewarded.

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