I recently attended the The Wall Street Green Trading Summit in New York. The program was a sell out, but reveals a still startup market in carbon trading, clean technology, and renewable energy. It is clear there is a growing number of capital providers who are watching this space and the larger investment houses and investment bankers are beginning to assign people to work on getting into this space. Names such as Goldman Sachs and JP Morgan have joined smaller, less known companies in setting up investments capabilities in this area. New hedge funds have been set up to take advantage of the nascent market that is wide open at this stage to new entrants.
Not surprisingly, the comments on the carbon trading market (markets in CO2 and other greenhouse gas emission reduction credits) were that it is still forming until the United States enacts a carbon cap-and-trade system to address climate change, which all believe is a only few years away. (For a discussion of this market, please refer to my carbon trading and climate change law blog The New Carbon Cycle.) It is clear that the enactment of such a program will unleash a substantial amount of capital, in the billions if not tens of billions of dollars, to invest in projects that reduce greenhouse gas emissions and generate carbon credits. These credits can be bought and sold in the carbon trading market domestically, and if set up properly, in the global markets under the Kyoto Protocol or what comes after Kyoto.
Is is clear the adoption of a cap-and-trade system will unlock a huge pent up level of capital to address greenhouse gas emissions and global warming. Wall Street is preparing for the establishment of a greenhouse gas regulatory system in the United States, and the ability to trade carbon credits with other countries.
Because no such system currently exists, many at the Wall Street Green Trading Summit referred to carbon trading, clean technology, and renewable energy as "the Wild West", since the markets are so new and developing. All the speakers and attendants believe that carbon markets and the clean technology and renewable energy markets present an immense investment opportunity in the future as renewable energy requirements increase at state and federal levels, biofuels, such as ethanol and biodiesel, requirements are established through proposed EPA rules, and as limits on greenhouse gas emissions go into effect and carbon markets are established. As we await what this Congress and this or a future president will do to address these issues, capital markets are positioning for potentially huge investments in this space.
