finance


It never stops:

The SEC has been pressured to address the interpretation of its rules relating to climate change since 2007, when a coalition of state governments, institutional investors, and environmental groups petitioned the regulator to issue guidance on disclosing climate risk. Investors gained more traction on the issue when Mary Schapiro took over as SEC chairman a year ago, says Jim Coburn, senior manager of investor programs for environmental-advocacy group Ceres. “The new SEC leadership has been very interested in protecting investors and giving them better information,” he says.

Only 17% of companies made any reference to climate change or greenhouse-gas emissions in their annual report filed in 2009, according to a review of about 400 companies by law firm McGuireWoods. To be sure, not every company has material climate-change risk to disclose.

I don’t suppose all these climate-change disclosure advocates ever considered the possibility that corporations know what they are doing. What is the real risk to these corporations that needs disclosing: catastrophic climate change or governments doing something stupid to address it?

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Is this about saving the planet or making money?  

The carbon market could become double the size of the vast oil market, according to the new breed of City players who trade greenhouse gas emissions through the EU’s emissions trading scheme.

The ETS market may see $3tn (£1.8tn) worth of transactions a year in the next decade or two, according to Andrew Ager, head of emissions trading at Bache Commodities in London, with it even being used as a hedge against falling equities or rising inflation. “It is still a relatively new industry with annual trades of around €300bn every year. But this could grow to around $3tn compared to the $1.5tn market there is for oil,” says Ager, who used to be a foreign currencies trader.

Carbon is one of the most plentiful elements in our galaxy. Yet by some sort of strange alchemy, the carbon released by burning fossil fuels such as oil is expected to be worth more than the oil itself.

An interesting investment perspective on climate change:

Noting there’s arguments and counterarguments on both sides of the global warming debate, Altucher declares: “Nobody really knows” whether the globe is heating or cooling or how much is manmade and how much is just the Earth’s natural cycle.

For investors, Atucher says the message is clear: Avoid solar stocks, since solar power is “never efficient” without massive government subsidies.

Watch the whole video.

There are some encouraging signs that investors are shifting away from the dubious economics of subsidized renewable energy production to technologies that focus on energy efficiency. A recent BusinessWeek article notes that the smart money in Europe is shifting from energy generation to such energy-efficiency plays as smart electric meters:

The move from energy generation to energy efficiency was evident among the entrepreneurs in Geneva schmoozing with venture capitalists. They included such companies as Britain’s AlertMe, a startup that uses smart-meter technology and Internet-connected home appliances to provide minute-by-minute updates to customers on how much energy they’re using. Chief Executive Pilgrim Beart says AlertMe technology can cut electricity consumption eight times more cheaply than building new renewables such as wind farms and solar parks. That’s because it reduces household energy use instead of requiring costly new energy infrastructure.

Venture capitalists, particularly those who fund early-stage investment, are switching investment strategies…

…private investors now are focusing on quick, easy-to-implement energy-efficiency companies that won’t take many years—and billions of dollars in funding—to turn a profit. Says one VC in Geneva, who declined to be quoted: “Why would we spend lots of money to fund a technology that may only break even in 2020? That’s not a smart way to make a profit.”

More indications that demand for wind turbines is slowing:

Cracks are starting to appear in the wind-power business: Spain’s Gamesa hinted yesterday ahead of its annual meeting that some customers are delaying orders for new turbines due to trouble landing financing.

Gamesa, one of the world’s top-three turbine makers, seems to be backing off projections for 2009 orders it made just two weeks ago.

Much of the talk at an alternative energy panel discussion I attended yesterday was about smart grids and their impact on energy demand in the future. And yet, it doesn’t seem a lot of venture capital is going into the sector:

here in this column we’ve talked quite a lot recently about how the cleantech VC community seems to be much more vocal about targeting capital-efficient energy efficiency and smart grid investments these days.

Except that I took a look at the details in the Q1 2009 Cleantech Venture Monitor (another great job by Cleantech Group’s Brian Fan and colleagues), and there’s no evidence yet of such a shift.

In their tally, solar remains the big dog, at almost 35% of all cleantech venture dollars in the quarter.  That’s just barely down from the ~38% it captured in Q1 of last year, for example.

Biofuels and transportation (not exactly the poster children for capital efficient investment areas) continue to be other big targets for VC dollars, at ~10% and ~20% respectively.

And where is “smart grid”?  At under a 5% share.  In the Cleantech Group’s methodology, energy efficiency investments tend to be spread across a number of different categories, but even the “green buildings” category garnered only ~10%, about the same as in Q1 2008.

Could it be because the Ciscos of this world already have the market wrapped up?

Enron was in there right at the beginning. For once, James Hansen gets it right.

Enron Lives! in Waxman-Markey. The sooner the public, media, and intelligentsia realize this, the faster cap-and-trade can be put in the dustbin of bad ideas.

The current debate has proven one thing very clearly. The U.S. climate debate is not about saving the climate.* It is about regulation for its own sake in the name of “saving the climate.” This fact should give pause to everyone who really cares about human welfare. Cap-and-trade is at odds with the economic wealth needed to adapt to a future that cannot be centrally planned by politicos.

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