After Climategate, Should Savvy Investors Short Carbon Credits? (PJM Exclusive)
Just how badly have Climategate and the failure of the UN climate change summit in Copenhagen hurt prospects for a global market in carbon “offsets”?
Camco International Ltd., bills itself as “a leader in demonstrating strong financial structuring and placement capabilities for carbon credits,” and is 19.5% owned by Al Gore’s Generation Investment Management. It was trading at 91 British pounds per share in April of 2007. Its shares, which trade on the London Stock Exchange, are now down in the 13.50 pounds per share ($20.56) range.
Climate Exchange Plc is the parent company of the Chicago Climate Exchange, a greenhouse gas market originally funded in part by the Joyce Foundation, on whose board sat Barack Obama. Its shares, which traded as high as 2000 British pounds a share back in August of 2008, have lost three quarters of their value and are now trading at about 500 pounds ($762) apiece on the London Stock Exchange.
The iPath Global Carbon Exchange Traded Note, “designed to be an industry benchmark for carbon investors,” is down 35% since its inception in June of 2008. With a market capitalization of just under $3.6 million and less than 600 shares changing hands on an average day, the instrument hasn’t attracted much investment attention.
But it’s doing better than the AirShares EU Carbon Allowances Fund, which shut down at the end of July 2009 after less than nine months in business.
“If there was a way, I definitely think you could make money hand-over-fist shorting this stuff,” said a fellow at the American Enterprise Institute and the Pacific Research Institute, Steven Hayward, who tracks environmental policy. He said the market for carbon offsets had plunged amid “eroding enthusiasm among policymakers for serious carbon constraints.”
In March 2010, two European carbon exchanges suspended trading amid concerns that some “certificates of emission reduction” were being illegally reused. Even Al Gore himself acknowledges that some carbon credits “fall into the ‘snake oil’ category” (talk about “an inconvenient truth”). Also in March, the governor of California, Arnold Schwarzenegger, asked the state’s Air Resources Board to give away most pollution allowances for free rather than auctioning them off.
For companies that sell carbon offsets or make markets in them, “whether they succeed or not is totally dependent on regulation,” said the managing director of Camino Energy, Mark Henwood. “If the regulation doesn’t come through, there isn’t going to be any business there.”
Without a “cap,” in other words, there isn’t much to “trade.”
Mr. Henwood said that investors in solar energy are better off than those investing in carbon offsets. At least at the end of the day, the solar guys will have some electric power to sell. In the carbon offsets market, “nothing of economic value” is being exchanged except something whose value is created by regulation, he said.
So is there a way for a savvy contrarian investor to cash in by betting against the liberal conventional wisdom on climate change, in the same way that John Paulson or Michael Burry made billions of dollars by betting against the mortgage-backed securities that were the product of liberal conventional wisdom that said every poor person should be a homeowner?
It might be possible, but it’s not easy, and it’s highly risky.
This is a political market not a free market. I wouldn’t go near this thing or have anything to do it, a normal market is hard enough to deal with never mind one where political manipulation will be/is the norm.
All markets, and not just the “carbon” market, have become “political markets,” run just like the Shanghai stock market; it’s the new reality under the new regime: “free markets” are dead.
“After Scott Brown’s election in Massachusetts, the conventional wisdom was that a health care overhaul was dead, but President Obama and congressional Democrats passed it anyway.”
The silly Democrats who listened to the rose colored predictions of Stanley Greenberg and other Democratic Party gurus probably have learned their lesson. Their poll numbers have continued to drop after the passage of the health care bill. These folks won’t have the guts to also try and ram cap and trade legislation down our throats. Obama is now a marginalized president who will live and die by the executive order. Only the bluest of elected officials will support him. The odds are minimally 50/50 that the Democrats are no longer a national party. Obama is destroying its remaining chance being a viable entity in the purple and red state areas of the United States.
I should add that I purchased a copy of Ira Stoll’s book on Samuel Adams some time ago. Unfortunately, I barely looked at it. That will be rectified later today. Sorry about that.
I agree that the Congress probably won’t do much with the MMGW hot potato. However, the EPA is trying and just may succeed. There are problems with action by the EPA, but we probably won’t know much for several months.
I would invest in concrete (very solid) and hot air balloons (almost certain to go up).*
*slinks away, ashamed of retelling an old joke.
I agree with Glass’s comment – never trust a political market. Inevitably, in the long term, such a market will crash; but with political support that long term could be a decade or more.
Excellent article. Hidden agendas eh? $$$$’s etc. And that fraud Dr Pachauri
no wonder he would like to see the UN IPCC treaty be signed. AGW is a fraud,
a fraud, scam, you name it.
The science is faulty (being polite) and all those involved should be called to account particularly if they have a conflict of interests either receiving funding to prove AGW or in league with clean energy or CCT investments. A conflict of interests or taking money under false pretenses.
Malcolm Turnbull MP for Wentworth electorate in Sydney will not be contesting the next General Election. There was rumors that Turnbull the ex Goldman Sachs Australian director had investments in CCTs. Only a rumor, but pressure
might have been put on him to prove any disassociation with Goldman Sachs.
He was threatening to cross the floor to vote with the government (labor) to support an ETS bill.
Well if CO2 isn’t the demon in climate change, that it isn’t why tax it,
unless you have Carbon credits to sell. It wouldn’t cut CO2 emissions, just
make those who produce them buy permits etc., and who pays … you and I?
The biggest scam against humanity I have ever heard of, those responsible like
Pachauri, Jones, Mann, Gore, Hansen (particularly) Schneider should be called
to account, particularly Pachauri who has a conflict of interests. So has Gore of course.
A market based on nothing but hot air, literally. A bubble of nothing to put subprime derivatives to shame.
You are far better off betting against the US treasury via an ETF vehicle like the TBT. Just like Carbon Credits, it is only a matter of time.
Cap & Trade, aka: Tax & Steal, is Social Control at it ugliest. It would have negatively affected the poorest the most, and everyone else at some level. All for money and power, based on lies.
Let this be a lesson to everyone not the listen to Environmental Extremists, they don’t have anyones best interests in-mind, except their own.
Al,Gore is a Fraking multi-millionaire on the world’s gullibility. Ten years ago, he was having trouble making his mortgage; now his energy bill rivals that of third world nations.
The Sun, balanced by water vapor, has driven Earths climate for billions of years; what changed? why did anybody buy into this CO2 trace-gas nonsense in the first place?
1) Money
2) Power
3) Mass Naïvety (being kind, very kind)
Any Questions?
It’s too late, we’ve missed the train on shorting this crap.
Well, You will have to find the brokers willing to extend themselves in such a high risk venture. I don’t think the volume is there to pull off a big short derivative like this.
#8: I’m not a futures expert but my understanding is that if you spend $1000 to short stock and the value eventually reaches zero, you would make just as much money as you would if you had shorted when said stocks were trading at their highest. Is that correct? If so, the risk in shorting is more on the upside than downside; if these stocks rebound to their pre-2010 levels, investors will lose their shirt 3 or 4 times over.
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