What’s cooking at JPMorgan?

While carbon offsets are controversial and always will be, they have enormous potential to promote an elusive goal: sustainable development. At their best, carbon offsets are a low-cost way to reduce greenhouse gas emissions, transfer clean technology to poor countries and help people out of poverty.

Which brings us to JPMorgan Chase and cook stoves.

The global Wall Street investment bank has begun subsidizing the production and distribution of efficient cooking stoves in Africa, an effort that could expand to India and southeast Asia as well. The project is the topic of today’s Sustainability column on fortune.com and cnnmoney.com. Here’s how it begins:

By any measure, it is a long way from the Park Avenue headquarters of JPMorgan Chase, the global investment bank that generated revenues of $100 billion last year, to the dusty streets of Kampala, Uganda, where a poor woman can buy a new cook stove for about $6.

What connects the big bank to that small transaction is the business of carbon trading.

JPMorgan is quietly pushing the boundaries of the carbon market – a sprawling international experiment to reduce the greenhouse gases that cause global warming – by subsidizing the distribution of efficient cooking stoves in poor countries. Because the new, improved stoves save fuel and produce less carbon dioxide than traditional stoves, they generate so-called carbon credits that can be sold to companies or individuals who want to offset their own emissions.

The business is complicated, controversial and potentially very profitable.

You can read the rest of the column here.

A couple of points that didn’t make it into the column. Odin Knudsen, who runs the carbon markets program for JPMorgan, is incredibly enthusiastic about the cook stove project, not only because of its business potential but because it can do so much good. Odin, who is 65, has worked for more than 30 years on sustainable development and international finance, mostly at the World Bank, and he really knows carbon markets. He told me that one key to really unleashing the power of carbon markets will be to get programs like distributing cook stoves, CFLs or small-scale energy efficiency measures accepted by regulated carbon markets like the EU European Trading Scheme. (Sorry, but this is unavoidably geeky.) Right now, these projects, which are known as programmatic clean-development projects (as opposed to the much-bigger one-off projects, like trapping industrial gases or landfill gas) can be used to generate voluntary credits, but they have not yet been approved by the UN regulators set up under the Kyoto protocol. Credits in the regulated markets are worth a lot more than those in the voluntary markets.

Another thing I learned while reporting this column is that cook stoves are a big environmental and health issue in the developing world. I spoke by phone with Ron Bills, a business guy—he was once CEO of Segway—who now leads a nonprofit called Envirofit, which is distributing super-efficient cook stoves in India. Ron told me that half the world’s people burn biomass—wood, dung, charcoal or agricultural waste—every day, and that this creates a huge problem of indoor air pollution. Envirofit is looking to carbon finance to jump-start its business, which is now supported by the Shell Foundation, among others. Check out Envirofit here.

Comments

  1. JPMorgan’s venture into carbon trading is great! Carbon trading is the epitome of the social capital market- an economy where social impact is valued, bought and sold. The key to tackling some of the biggest social and environmental problems is creating market incentives for social change. Hopefully carbon regulations will come to the U.S. and not only increase corporate accountability, but also contribute to a cleaner environment.

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