Buffet invests $44 billion in Carbon Credits

Trade Carbon Credits: 


The Worlds Largest Commodity Market


Buffet invests $44 billion in Carbon Credits
Unless you’ve had your head buried in the financial sand over last few months you could not have failed to miss the implementation by Barack Obama of ‘Cap and Trade’ on emissions in the US which is set to be the biggest growth market the financial world has ever seen.

Wall Street: Trading in Carbon Credits of Carbon Dioxide, along with other Greenhouse gases such as chlorofluorocarbons (CFCs) is indeed becoming the Worlds Biggest Commodity Market worth trillions of dollars.

Carbon Credits have been trading in Europe for the last 2 years under the Emissions Trading Scheme and prices have risen from $4 to $15 in that time. This is not bad going considering that critics have stated the emissions limits were set too high. In addition we have had the global crisis to contend with. The reason this market is going to be an investor’s paradise is simple - The market has been created to artificially push the prices of carbon offsets up every year in order reduce emissions.

"Carbon will be the world's biggest commodity market, and it could become the world's biggest market over all."... "Barclays Capital" (New York Times)

Put simply, governments are telling all companies to lower their emissions. Companies can use the government imposed limits every year. If they exceed these limits they have to purchase Carbon Offsets or pay a huge fine. Prices will increase annually because once a company buys a Carbon Offset Certificate (equal to1 metric tonne of CO2) that amount of carbon is retired and can never be traded again, taking it out of circulation. It’s not ‘if companies want to’ purchase carbon offsets it’s ‘when’ and ‘at what price’?

In the US Carbon Offsets are available at the current European rate of $15. The US is looking to implement ‘Cap and Trade’ in 2012. According Reuters and Barclays Capital, credits will trade at $30 plus as anything less will not be enough to force companies to go green. The European Union and the US have both agreed to reduce the annual limits for carbon emissions up to 2050.

There is no FSA regulation of Carbon Credits because the European market is closed to investors. In the US the exchange is fully regulated by FINRA, who also regulate the NASDAQ.

Investors can purchase Carbon Offsets through a registered US liquidity provider such as Coolpass. You will be issued a Carbon Offset Certificate which you can trade through the Chicago Climate Exchange - The world’s first environmental derivatives exchange and owned by the London-based Climate Exchange PLC which also owns the European Climate Exchange, however 10% is currently owned by Goldman Sachs.

So here we have a market that is set to go only one way – which is up. It’s regulated by FINRA and is being lead by the Barack Obama Administration who put the wheels in motion in May 2010.

With industrial global emissions accounting for about 33 gigatonnes, a $30-per-tonne carbon price would pay the whole bill. (Source - BBC News)

Buffet invests $44 billion in Carbon Credits (Source -Telegraph UK)

President Barack Obama has said he wants the country to cut emissions of greenhouse gases to 17 percent below 2005 levels by 2020. (Source – Reuters)

“I believe the best way to control greenhouse gasses is through legislation that places a market-based cap on emissions. By setting a market-based cap you create a commodity which places a value on a limited resource”. (Source – Barack Obama)

“Over time, as the cap on greenhouse gasses gets lowered and the commodity becomes scarcer the price goes up – The price of the status quo will become more expensive” (Source - Barack Obama)

One need only revert to the simple law of supply and demand to see that this industry is going to be huge. If increased demand dictates an increase in price, getting in now could be one of the wisest investment moves you make in the first half of this century.