Balancing Act Part 2: The Big Deal About Carbon

May 2007


Image from airflow engineering
The multi-billion industry of today is carbon emissions.  Climate change is on top of many government's agenda and the buzz words on the trading floor are "carbon credits" and "carbon offsetting".

Carbon Credits is used in industries such as the oil industry who have a certain number of carbon credits issued to them by the government (as set by the Kyoto agreement).  They use this as a commodity to trade with other industries who require more carbon credits. Click here for more information.  Companies can also get involved in carbon-neutral projects, that is projects that will offset the companies' emissions.  For example BP has got involved in a couple of solar plant projects in Spain and India.

In 1997, the Kyoto agreement was put into place in Bill Clinton's era.  When George Bush came into power, his administration took the US out of the agreement citing that it does nothing for the American economy!  Two interesting developments occurred after:


Drought in Africa

The whole stance on carbon trading appears a farce unless all countries including the US and Australia ratify the Kyoto agreement.  April 19, 2007, the Financial Times said that China will produce more carbon emissions than the US by the end of next year.  The same report said that the US outputs 20 tonnes of carbon per capita compared with China who are 3.2 tonnes per capita.  The rest of the world is 3.7 tonnes per capita.  What the report didn't say is that China also produces a significant number of solar panels and wind turbines used in the rest of the world.  German green energy companies have been tying themselves into the Chinese manufacturing machine because no where in the world can produce goods cheaper than China!  So is it naughty China or should governments be giving China a concession as they are a world producer of green technologies?


Hurricane Rita

Climate change has an impact on key industries such as agriculture, tourism, energy, transport and insurance.  The Carbon Disclosure Project, backed by 225 institutional investors, produced a report indicating that less than half of companies that said climate change represented a commercial risk or opportunity implemented a greenhouse gas reduction programme.  Approximately 0.1% of invested assets are currently allocated to products which explicitly incorporates carbon research.  In contrast, about 40% of those assets could be described as being at significant risk.  Some companies have said that they will offset all emissions through tree planting and carbon trading.  Pat on the back for HSBC, but many more companies are still apathetic about the the ecological damage their company is doing by not taking charge of their environmental assessment.  Surely it would be better for companies to say they did what they could when they had the chance rather than regretting when it was too late.

From the conservationist view point, the question is what measures must happen now to keep the world in harmony.  In Chinese we talk about Ying and Yang.  When one is greater than the other we see an imbalance and things go wrong.  If it is about our health, we see sickness.  Everyone is responsible for maintaining the balance of life for planet earth.

In our next article we will examining Carbon Offsetting.