Here comes a new carbon finance market, this one with Chinese characteristics.
In the latest sign that China takes the threat of global warming seriously, Chinese business executives with close ties to the government have launched a voluntary market in Beijing to buy and sell carbon credits.
Just don’t call it cap-and-trade, which is the regulatory approach embodied in the climate legislation pending in the U.S. Congress. The “cap” part of cap-and-trade remains anathema in China. As a developing country where billions of people earn less than $3,000 a year, China simply won’t accept mandatory limits on its emissions of greenhouse gases.
David Yarnold, Environmental Defense Fund
But the Chinese have enlisted western partners to build a market that will, as they put it, “limit and incentivize.” The theory is that a voluntary market in carbon credits will limit emissions by providing financial incentives to Chinese companies to develop renewable energy, promote energy efficiency and, above all, find environmentally-friendly ways to burn coal. Some of that money would come from outside China and would would come from within.
This could lay the groundwork for a mandatory market in the not-too-distant future.
That, at least, was my takeaway from a Low Carbon Conference held today in New York that brought together leaders of the world’s big stock exchanges, energy industry executives, environmentalists and experts in carbon finance. [Disclosure: I hosted the event for BlueNext, a French company that recently announced a partnership with the China Beijing Environmental Exchange to develop carbon trading in China.] Not surprisingly, the Chinese are looking for money from the west, specifically from companies and governments looking to offset their emissions. They argue that they can reduce emissions faster and cheaper than the U.S. or the EU. But they also expect to raise money from businesses and individuals in China that care about climate change.
One company represented at the event, the Tianping Insurance Company, has said it will become China’s first carbon neutral business, in part by buying credits. It bought its first credits last month.
David Yarnold, the executive director of the Environmental Defense Fund, which has worked with the Chinese to develop a carbon market, put things in perspective nicely:
This new partnership between Wall Street and the Great Wall flies in the face of conventional wisdom.
Today, you will witness tired conventional wisdom drawing its last breath. You will learn that China is no laggard in the race to develop clean energy and reduce global warming pollution. In fact, it is moving ahead.
Just five years ago, who would have thought that the New York Stock Exchange would be hosting a meeting on carbon trading? Who would have thought that China would have an environmental exchange?
Of course, it’s no surprise that Yarnold and business-friendly EDF, which pioneered emissions trading in the U.S. during the first Bush administration, would endorse a market-based solution to climate change. As he put it:
Many believe markets are the source of environmental problems. They think that the relentless search for profit that leads to the sacrifice of the environment and that money is the root of all environmental evil. In contrast, here we are, convening to assess how markets can be put to the service of environmental protection, how markets can be the engine of innovation that will support the growth of the new low carbon economy.
What was striking was to hear Chinese executives like Xiong Yan, chairman of the China Beijing Environmental Exchange, who has impeccable Communist Party credentials, wholeheartedly agree that banks like Merrill Lynch and Citi and utilities like Duke Energy need to help solve the climate crisis. Merrill, Citi and Duke were all invited to speak by the Chinese, who shaped the agenda for the event.
While there was lots of talk about wind, solar and efficiency, the conversation – like so many conversations about climate – inevitably kept coming back to the question of coal. China gets about 80% of its electricity from coal. The U.S. gets about 50%.
Jim Rogers, Duke Energy
“Coal binds the U.S. and China together,” said Jim Rogers, CEO of Duke Energy, a major coal-burning utility as well as a supporter of a mandatory U.S. carbon cap. “Our challenge is to find a way to use coal in a low carbon world.”
Duke is betting on the technology of carbon capture and sequestration. By contrast, a Chinese coal executive touted the virtues of using algae to absorb CO2 emissions. Whatever technology proves to be most effective–assuming clean coal is more than a distant chimera–ought to be shared quickly and widely, U.S. and Chinese execs said.
For more on China’s role this week in New York, where President Hu Jintao addressed the United Nations, see Is China Turning Into the Climate Good Guy? by Time’s Bryan Walsh and Are Chinese Emissions Pledges a Game Changer for Senate Action? at Joe Romm’s Climate Progress.
I grew up in Pittsburgh, PA, and I went to the University of Pittsburgh, where I minored in History, my specific attention was on the history of local Vaudeville… (don’t worry, I’m going somewhere with this)
In my studies, I spent a lot of time in archives, reading old newspapers, and this man, Edward Manning Bigelow, kept popping up on the front pages of newspapers. Bigelow, a slight, reportedly under-spoken man, served as the Director of Public Works in Pittsburgh from 1888 to 1900, and is now mostly known to current Pittsburghers as a guy they named a Boulevard after, and a statue in the park. However, Bigelow had an understanding that we sorely need to recognize. Bigelow knew that no matter the strength of the resources a particular area, if the area becomes polluted to the point that no one wants to do business in it, those local resources are useless, or at least diminish in value.
Bigelow pushed major landholders like Mary Schenley to donate swaths of land for parks, parks that still exist to this day. Nice ones too. He took advantage of George Westinghouse’s “half day Saturdays”, and encouraged locals to take the trains out to the cleaner suburbs, like Kenny Wood and West View Park.
The point of my history lesson is that Bigelow pushed business to understand that their environmental effects could damage commerce, aside from any ethical standpoint or concept of social responsibility. If your workers are unhealthy, you ultimately lose production; if the place where you manufacture is filthy, workers will move on, especially the skilled and educated ones, and new business will dry up.
Bigelow died in 1916, Pittsburgh still cloaked in soot, but Pittsburgh went on to become one of America’s greenest and most livable cities. We need to remember that for all the government regulations we put on businesses and corporations, THEY need to understand their impact, they need to not take for granted that at the very bottom of their success is a population that is relatively healthy and prosperous enough to buy what the Economy is selling. Basically, you don’t s**t where you eat. In a global economy, we really need to think about what that last colorful cliche means on a broad scale.