How to Profit From Greenhouse Gas Emission Restrictions and Incentives

It’s one of the fiercest debates in the world – both politically and economically.

That’s because it concerns the world itself – namely, how to protect it from harmful environmental emissions and global warming.

Many environmentalists say global warming not only exists, but is also the leading cause of damage to the Earth. They cite obvious factors like the Antarctic ice shelves breaking off, glaciers melting at unprecedented rates and the holes in the Earth’s ozone layer.

But a few scientists believe global warming is exaggerated, with warmer temperatures and melting ice the result of normal up-and-down cycles that occur every 10,000 years or so.

For the record, I believe global warming is real. But the big debate centers on the question of why it’s happening. Let’s examine the biggest offenders, the incentives being offered to reduce emissions and who stands to capitalize from new energy legislation…

Global Warming… Greenhouse Gas Emissions Are The Real Problem

No matter where you stand, you’ll likely know that the consensus is that greenhouse gas emissions are the cause of the problem.

The most prevalent of these gases is carbon dioxide (CO₂). It’s the result of burning fossil fuels like coal, natural gas and petroleum, as well as from vehicle emissions. The chart below – courtesy of the Environmental Protection Agency – shows the breakdown of greenhouse gas emissions – and just how much of a factor CO₂ is…

The greenhouse gas problem stems from this cycle…

• Gases rise up into the atmosphere, where they accumulate and create an “insulating” layer.
• This layer traps more of the sun’s heat within the Earth’s atmosphere instead of it radiating out into space.
• As a result, global temperatures rise. If left unchecked, within 100 years – or much sooner by some estimates – oceans will be 20 feet higher than today.

Obviously, rising ocean levels would have a devastating effect. Many low-lying coastal areas would be completely submerged, with millions having to move to higher ground. And some low-lying islands would disappear entirely.

Hurricanes and typhoons would be 10 times as damaging as they are now, and places previously thought to be immune from storm surges would find themselves in the middle of a New Orleans-like nightmare.

So it’s obvious that the easiest way to attack the greenhouse gas problem is to go after CO₂, as it’s responsible for 55% of all greenhouse gas emissions. But that means targeting the sources…

Who’s the Biggest Global Warming Offender? Look in the Mirror…

While global warming – and, by extension, greenhouse gas emissions – are a worldwide problem, you can see from the chart below that the United States is by far the world’s biggest offender.

Since the beginning of the Industrial Revolution, we’ve pumped more than 6,000 million metric tons of carbon dioxide into the atmosphere. To put that in perspective, our emissions are equal to that of Europe and China combined. Russia is about half that of China.

While the United States is the largest greenhouse gas emitter, it’s the rate of growth that worries scientists and policymakers – particularly with other nations quickly establishing themselves as major players on the global stage.

For example, by 2015, emissions from developing countries like China, Russia, Brazil and others are expected to exceed those of developed countries.

So how are we tackling the problem?

Got Emissions? Bury Them…

While electric vehicles, like PHEVs, will eventually address CO₂ emissions in that area, mass production and adoption is still a long way off.

At the moment, it’s more viable to tackle the millions of tons of CO₂ that billow out of smokestacks at power plants. And that’s what scientists have explored over the past 10 years.

So far, the most promising and technically feasible idea is to capture the CO₂, liquefy it, and pump it deep underground, beneath an impermeable layer of rock from which it can’t escape.

The technique is already being used in Canada on a few older oil and gas wells as a means of extending their productive life, with CO₂ piped there from the United States. There’s no reason to believe it won’t work here, but there’s just one problem: cost.

Incentivizing the Offenders Through “Cap-and-Trade”

Of course, no plant owner is going to rush to spend the millions required to capture CO₂… unless legislators make it illegal and painful for them not to.

The key is to make it worth their while via incentives.

And that’s happening in the form of a tax on carbon emissions – a so-called “cap-and-trade” system.

Simply put, the government sets the “cap” on the total amount of carbon emissions allowed. Emitters can then “trade” (buy and sell) permits, which allow them to emit CO₂. The aim is that the overall limits gradually decline, thus forcing the price of the permits up, making it more economically attractive to actually stop emitting.

Unfortunately, though, the United States is noticeably behind the rest of the world in its implementation of such a system. And realizing that a change of this magnitude will take time, a cap-and-trade system is working its way through Congress in the form of the Waxman-Marley bill.

Naturally, with Washington involved, it won’t pass easily. However, it has become a political hot potato and Congress will eventually pass some form of the bill. And the good news for investors is that it will generate another new revenue stream in the energy sector.

The Company Leading the Way… So Far

A few coal-burning utilities aren’t waiting for the legislation to kick in. Alstom, SA (AOMFF.PK), a French energy infrastructure manufacturer, has a CO₂ injection pilot project with American Electric Power Company, Inc. (AEP) – the largest coal-burning power utility in the United States – at one of AEP’s plants in West Virginia.

Using Alstom’s technology, AEP is capturing and liquefying about 1.5% of the annual CO₂ output from the plant and injecting it deep underground. If successful, Alstom hopes it will be able to leverage its “early-in” success in West Virginia, other parts of the United States and elsewhere around the world.

Comments

[john s. gordon:]

ozone-layer damage is related to chlorofluorocarbons but not to greenhouse gases. the way you have phrased it confuses the issue.

you show greenhouse-gas emissions by quantity in your first chart, but the effectiveness of methane (swamp gas, cowfarts) as a heat trap greatly exceeds that of CO2. a second chart accounting for this factor would be helpful. the relevant question is, what are the kinetics of CH4 destruction in the atmosphere under various conditions.
> jack

Oct 11 08:48 AM

[jerrydd:]

Many other RE are far cheaper than CCS which will not be viable as it takes too much energy, $. So investing in it isn't a good idea.

China has surpassed us in CO2 as ours are going down and theirs going up.

Fossil fuels are going up with a bullet next yr when the economy recovers so GWG's will decrease even more here.

Obama's Tax and Cap of just a straight tax would be far better than the congress cap and trade..

Oct 12 05:44 AM

[TCK:]

These are the same scientist that 30 years ago were predicting a coming Ice Age.

With the earth cooling over the last 10 years, the original forecast may be closer to the truth.

Either way , it is mostly a tax scheme promoted by the people who hate capitalism and technology !

Oct 12 09:00 AM

[La Marque:]

There is no such thing as 'consensus' in science; it is either a fact or not a fact. Global warming is a political hoax.

Oct 12 09:35 AM

[Ferdinand E...:]

This is an interesting article, because like the author I also believe in global warming. I believe in it because I don't give a ______ about it, and by saying that I believe in it I avoid having to talk to ignoramuses. Of course, bigger fools are working the other side of the street.

Cap and trade; Waxman-Markey. What next? There was some nonsense about General Petraeus in the Financial Times today, and they forgot to mention that only a clown would wear ribbons up to his shoulder blades, especially when none of them are for combat.

I wonder what is on Oprah tomorrow?

Oct 12 10:03 AM

[31October:]

Cap & trade will obviously cause an increase in utility bills. When the feds begin subsidizing people's big, fat utility bills, maybe they will outsource the work. That would be where to profit from CO2 emission restrictions.
Or you could just invest in Al Gore's GIM company, like Nobel committee members.

Oct 12 11:36 AM

[realold:]

And, one good volcano good bring on global cooling for a few years, at least. Global warming fanatics - be careful for what you wish.


On Oct 12 09:00 AM TCK wrote:

> These are the same scientist that 30 years ago were predicting a
> coming Ice Age.
>
> With the earth cooling over the last 10 years, the original forecast
> may be closer to the truth.
>
> Either way , it is mostly a tax scheme promoted by the people who
> hate capitalism and technology !

Oct 12 08:52 PM

[realold:]

I think that global warming alarmists should be more worried about running out of energy/water/food, sky-rocketing welfare/deficits via Obama "stimulus" and a bunch of other events that will make life miserable with or without global warming. The earth's rotation is slowing, its orbit is increasing, its internal radiation decreasing, etc. The earth will freeze. Enjoy the warmth.

Oct 12 08:56 PM

[Bobco23:]

Let's see. the atmosphere is made up of 78% N, 21% O2, and 1% of other stuff. CO2 is a small component of "other stuff." Man contributes less than 2% of the CO2 "pollution." So 2% of 1% is 2 ten thousandths of a percent. Man made global warming from CO2 is a scam.

The only ones who believe in it are fools and those who stand to profit from the scam.

Oct 12 11:06 PM

[mako0415:]

Far more stand to profit from suppressing the science. Oil and coal companies are barrowing the Phillip Morris playbook. Muddy the science and nothing will be done for 30 years. Honestly who benefits more than oil and coal in the manipulation of science, but by all means take the word of the multi nationals and the politicians they fund over an over whelming scientific consensus. Those mean scientists, they just hate capitalism!


On Oct 12 11:06 PM Bobco23 wrote:

> Let's see. the atmosphere is made up of 78% N, 21% O2, and 1% of
> other stuff. CO2 is a small component of "other stuff." Man contributes
> less than 2% of the CO2 "pollution." So 2% of 1% is 2 ten thousandths
> of a percent. Man made global warming from CO2 is a scam.
>
> The only ones who believe in it are fools and those who stand to
> profit from the scam.

Nov 15 08:43 AM