Acknowledgments
While writing this book we have benefited from the knowledge of a number of people, many of whom have become experts in the new field of carbon finance. They include Jane Ambachtsheer Mercer Investment Counseling , Dominic Barton McKinsey amp Company , Ann-Marie Brinkman International Energy Agency , Frances Buckingham SustainAbility , Valerie Cooper Weather Risk Management Association , Renata Christ Intergovernmental Panel on Climate Change , Julie Desjardins CICA consultant , James Evans RBC...
Box Hsbc The Worlds First Carbon Neutral Bank
As well as examining the indirect impacts of carbon risk through their lending and investment portfolios, HSBC has also addressed its direct impacts on climate change, and became the first major bank to announce it was carbon neutral. In 2004, HSBC made a commitment to be the world's first major bank to achieve carbon neutrality, with a Carbon Management Task Force announcing a target of 5 percent reduction over three years. The HSBC Carbon Management Plan consists of three phases 1 to manage...
The Changing Climate
Although the issues surrounding climate change are perceived as being fairly new, a brief reflection on the history of research in the area reveals studies in the nineteenth century that involved the concept of global warming. Early works by the French mathematician and physicist Joseph Fourier 1768-1830 explored the field of terrestrial and radiant heat, and concluded that the atmosphere could, indeed, trap heat. Fourier suggested that the atmosphere warms the earth's surface not only by...
New Era Of Fiduciary Responsibility For Institutional Investors
Through the power of persuasion due to sheer size and global reach, backed by economic pressure, institutional investors have the capacity to hold corporations accountable for the environmental impacts. They can adopt this role by Incorporating environmental opportunities into investment strategies. Engaging environmental underperformers in active dialogue. Filing environmental resolutions and voting proxies at companies' annual general meetings AGMs in order to improve their corporate...
Carbon Disclosure Project CDP
In 2002, the Carbon Disclosure Project CDP was introduced, in which 35 institutional investors, managing more than 4.5 trillion, asked the world's 500 largest companies to disclose how climate change could affect their businesses. Of the companies surveyed at that time, the first CDP report CDP1 concluded that only 8 percent of the companies, representing 53 percent of the emissions of the S amp P 500 constituents, disclosed their emissions. The report further revealed that emissions...
Box Cargill Invests In Biodiesel Production In Europe
Cargill, a U.S.-based global food and agriculture company recently announced its acquisition of a 25 percent stake in Greenergy Biofuels Ltd. in the United Kingdom. Tesco owns 25 percent of Greenergy Fuels, which owns the other 75 percent of Greenergy Biofuels. Tesco is the leading biofuel retailer in the United Kingdom, offering biofuel blends at more than 40 percent of the petrol stations attached to its supermarkets. Greenergy Biofuels is building a 100,000-ton 114 million-liter capacity...
The Evolution Of Products For Carbon Finance
There is a lingering hope in some quarters that we will find a technological solution to the climate change quandary such that life in the West can continue pretty much as it is now. That solution might be clean coal, the hydrogen economy, carbon capture and storage, or maybe cheap, safe, low-waste, proliferation-proof nuclear power. It is this belief that lies behind the Asia-Pacific Partnership on Clean Development and Climate, which was discussed in Chapter 6. This belief tends to downplay...
Price Discovery
There have been many warnings to the effect that the development of a cap-and-trade system for carbon would be detrimental to business interests, specifically that it would drive energy-intensive businesses out of the EU and would have a very negative impact on the economy. This could still happen in some cases, aluminum being a widely touted example. However, the fact that the EU has embraced the challenge of living in a carbon-constrained world before its industrial rivals has already...
Sijm J.p.m. S.j.a. Bakker Y. Chen H.w. Harmsen And W. Liese 2005 Co2 Price
Abbasi, D. 2006. Americans and Climate Change Closing the Gap between Science and Action. Yale School of Forestry amp Environmental Studies, available at ABI. 2005. Financial Risks on Climate Change. Association of British Insurers, Summary Report and Technical Annexes, www.abi.org.uk climatechange. ABN Amro. 2005. Response to Carbon Disclosure Project, www.cdproject.net. ACF. 2006. False Profits. Australian Conservation Foundation, available at www.acf.org.au. ACIA. 2004. Impacts of a Warming...
Cement
Building material manufacturers are feeling the pressure to adapt their processes and product characteristics to meet new and more stringent environmental demands. Within the broad spectrum of construction industries, cement production is estimated to contribute 5 percent of global man-made CO2 emissions see Figure 3.1 . Cement, and the concrete made from it, provides the basis for most infrastructures. Its use is growing rapidly in the developing world, and, indeed, after water, concrete is...
William Tharp Invited Authors Comment The Carbon Project Financingcontinuum
Venture capitalists and term financiers have different perspectives on carbon risk and valuation of projects. Venture capital has the capacity to take carbon risk management into account, and consider their involvement in a project to be one of value creator. Traditional long-term project financiers, however, consider their capacity as that of value recognition. As such, longer-term financiers analyze the intrinsic value of a project, but are highly unlikely to take any lending risk in which...
Carbon Brokers
A number of brokers specialize in the carbon markets, usually as part of a strategic focus on the broader emissions and environmental products market. These brokers are active in both the EU ETS and the Kyoto project markets, where transactions continue to be highly structured and the value-add of a knowledgeable broker is considerable. The key brokers currently involved in the carbon markets include Evolution Markets, CO2e.com, Prebon, Spectron, TFS, ICAP, and Natsource. The relationships...
Examples of Weather Derivative Contracts
Temperature-based swap The swap undertaken by two Japanese companies that faced opposite weather risks serves as a classic illustration of a temperature-based derivative product. Tokyo Electricity Power Tepco experiences increased demand for electricity during unusually warm summers, swapped a portion of this weather risk with Tokyo Gas Togas , which experiences a decrease in demand for gas-fired water and central heating under the same conditions. In 2001, the two companies entered into a...
The CDM Bottleneck
Apart from suffering from procedural complexity, the CDM machinery was also starved of resources, having only a handful of staff available to manage the biggest environmental challenge the world has ever faced. Whereas most other problems can be tackled in a piecemeal fashion, climate change must be addressed in a coordinated way if we are to have any chance of succeeding in reducing the risk in time. The difficulty of identifying suitable projects and getting them through the approval process...
Aviation
In the last three decades of the twentieth century, a number of technological and operational efficiencies were made in commercial air travel that resulted in significant reduction in energy and carbon intensity within the industry. These gains, however, were offset by the rapid increase in air travel over the same period. Within the EU, overall CO2 emissions fell by 5.5 percent in the 1990s. What is notable, however, is that CO2 emissions from the international aviation sector of its 25 member...
The Broader Policy Context
The threat of climate change is not the only reason that modern society should embrace a low-carbon future. For several decades, oil geologists have been predicting a peak in oil and gas production as newly discovered supplies have been falling behind the growing demand. Production from the continental United States has been declining since the 1960s North Sea oil is now following suit. As outlined in Chapter 3, new supplies are being developed in less dependable places such as the former...
Tidal Energy and Wave Energy
Like wind power and solar power, tidal energy is intermittent. However, it is extremely predictable, and it could deliver electricity on a scale and at a competitive price that equals large HEP, fossil fuels, and nuclear power. Furthermore, there is a successful model the 240MW Rance barrage, which was built near St. Malo in the 1960s. In addition, three smaller projects are operating in Canada, Russia, and China. In the United Kingdom, studies have been made of the tidal potential of several...
Modern Biomass and Biofuels
Biomass is where we started when we moved away from simple reliance on somatic, bodily energy. We burned wood to cure and cook food and to heat simple habitations. Now we are coming out of the modern energy transition looking for new solutions, which leads us straight back to biomass. Traditional biomass combustion, as discussed in this chapter, is not a solution. It depletes the forest and provides energy very inefficiently for its users. However, modern biomass combustion is very different,...