$19 Trillion Captured Carbon Market – How Will We Reward Carbon’s Hunters and Gatherers?
by Jim Lane (Biofuels Digest) The IPCC forecast seen below tells the tale of how the next 50 years will play out in climate action. There’s going to be a demand to remove 50 gigatons of carbon emissions through abatement (wind, solar, renewable fuels, energy efficiency, and so forth), and 20 gigatons per year through direct CO2 and methane removal. Assumes of course that when the Arctic melts that we won’t have a catastrophic release of methane — a topic for another time.
First of all, let’s do a value exercise. Adding up the carbon price in California these days, you get to $275 per ton, more or less. California has a market-based approach, demand and supply keep the exact number jiggling around a bit, but that’s where it is, ballpark, these days. That’s mostly for transport because most of the actual emission-reducing legislation has been aimed at transport for reasons of energy security as well as emissions.
With electric power the actual price support is harder to calculate. But consider the $981 price on carbon for electric vehicles — based on common-sense math which you can follow here. Point is, transforming electric stuff ain’t cheap, either.
What’s the carbon-reduction economy worth? 70 gigatons per year – that’s 70 billion tons, is worth 19.25 trillion per year — that’s 93 percent of the size of the entire US economy last year.
Time will tell how supply and demand will work out, so let’s be circumspect. Yet, we can say for sure that carbon removal is going to be big business. So, you might do well by doing good.
But how?
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What is holding back climate action right now? It is not so much the technology. An acquaintance of mine who at the time headed up Wells Fargo’s climate investing told me that the single biggest barrier to solving climate was the shortage of due diligence experts to evaluate the projects and the deal flow.
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Sure, we see an awful lot of stories about tech billionaires and there seem to be a large number of them, but how many of them are actual inventors and how many of them are really financiers, traders or merchants, disguised as technologists through the branding, styling and communication that pertains to what we call “technology companies”?
You might well state that the value of Apple plays back to fundamental innovation, but another might state that most of its value is derived from packaging, integration, brand, and the network effects that flow from control of technology platforms.
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Transformation of our financial systems is needed in order to assess risk, spread it, and to help create speedier rates of returns for investors that will justify the technology, policy, currency, market and adoption risks they are running. Altruism only takes society so far and though it is unpalatable to say “greed is good,” it may be fair to say that “greed can lead to good”. Certainly, it is the case that small investors find it hard to run large and long risks, and will not be able to fully participate in a technology-driven shift of it takes too long or leads to losses that cannot be borne.
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We need:
1. Straightforward, system-wide carbon targets that tie back to societal goals.
2. A market system within those targets. Those who miss their goals buy credits from those who over-innovated.
3. A single standard by which we count carbon.
4. A book and claim system by which we report progress.
5. An audit system to vet those claims and root out the liars.
6. Carbon trading platforms which are as easy as trading stocks or currency, so that traders can participate and create liquidity in carbon trading.
70 gigatons. 50 to reduce, 20 to recapture. There’s a lot of friction in the system and if we try to go fast the way we are structured, something will catch fire and burn. If we get focused on finance, that’s one way of ensuring that what doesn’t get burned is us. READ MORE
Webinar: Examining the Pros and Cons of Carbon Pricing Policies (ConservAmerica)
