/* Google Analytics */

Thursday, November 11, 2010

Profiting from environmental catastrophe

The Chicago Climate Exchange has collapsed and is going out of business. It originally announced last month that it was scaling back, but now the plans are apparently to close up shop in December.

The exchange was created to trade carbon emission credits, in anticipate of a US cap-and-trade bill, but the bill died in the 111th Congress and its prospects are non-existent in the 112th.

Popular Science sees this as a bad thing: if the US won’t trade carbon credits, other countries will. Investor's Business Daily sees it as a good thing, further evidence that “job-killing” environmental regulation is temporarily on the back burner.

Like anything profiting from a government-created market, the major investors were among the most politically well-connected. According to IBD, the financial losers in the death of the CCX are its two main investors,Al Gore's Generation Investment Management and Goldman Sachs. Also losing out is Franklin Raines, Fannie Mae CEO during the subprime fiasco, who owned a patent on trading related to trading carbon emissions of residences.

Perhaps with the retrenchment of the CCX, the investors and regulators can solve the inherent problems of the carbon-trading schemes, including their potential for money laundering and the risk of fraud in countries with low transparency and/or weak legal enforcement.

No comments: