Global push to cut greenhouse emissions

By Chris Giles, London, FT


The drive to tackle climate change gathered pace on Thursday as Morgan Stanley, the investment bank, announced a $3bn plan to invest in the carbon trading market amid mounting evidence that some US states are growing more sympathetic to international action.

The moves come just days before a UK government report is expected to propose a huge expansion of the global market in trading permits for carbon dioxide emissions. It will also propose extending existing mechanisms for western companies to benefit from promoting cleaner energy in poor countries.

A bigger market could offer substantial business opportunities. One recent calculation suggests that global expenditure on curbing the effects of climate change could be worth about $1,000bn (£529bn) within five years of action being agreed.

The European Commission added to the calls for action on Friday when it urged member states to intensify their efforts to reach the targets on emissions agreed under the Kyoto Protocol. “All member states must pull their weight to ensure that we deliver on our collective commitment. Those that are not on track urgently need tostep up efforts to meet their targets, if necessary by taking further national measures to reduce emissions,” it said.

The commercial opportunities were underlined on Thursday as Morgan Stanley announced its big bet on the green energy market. It plans not only to invest most of the $3bn in buying carbon credits around the world but also to set up its own low-emission energy projects.

The prospect of building an international consensus on the back of the findings of the Stern review appeared to strengthen as Citigroup, the world’s largest bank by market value, said in a research note that carbon trading was almost certainly going to become the most important weapon in combating global warming, including in the US.

Certain US states have recently taken steps to establish carbon markets. Seven states in the north-east have agreed a regional move to cap emissions from 2009, while California has set emissions limits.

The UK government-commissioned review, led by Sir Nicholas Stern, former World Bank chief economist, will say that the cost of rising concentrations of carbon in the atmosphere far outweighs the cost of acting now to slow global warming.

It reflects the UK’s efforts to lead the world towards fresh initiatives on climate change before efforts under the Kyoto protocol run out in 2012.

According to the review, big polluters would be able to cut emissions to the level of credits held, buy new credits in the market or earn new credits by making investments in carbon-efficient technologies in developing countries.

The review team has not been discouraged by the slump in carbon prices in the fledgling European carbon-trading market in April when most European countries said they had not used up allocations. One person close to the review told the Financial Times: “We have learnt a lot from Europe’s experience.”

A recent International Energy Agency paper suggested that the most important and available technology for reducing emissions would be carbon capture, in which carbon dioxide from burning fossil fuels is pumped underground.