Talking Green

Buffet Constellation Break..

Buffet got booted out from his Constellation deal. With the breakup fee of $1 billion, he easily doubled his $1 bil investment. You read it right, $1 billion, that is. Gee whiz, this is truly the mother of break up fees..

World Bank Raises $300 Mil from Green Bonds

This is good. Despite global financial crisis the World Bank in partnership with SEB and several Scandinavian institutional investors, was still able to raise $300 million in Swedish krona-denominated six-years green bonds. Funds raised will be directly invested into climate change related products. Via Environmental Finance.

The money raised will be invested exclusively in technologies that reduce greenhouse gases, energy efficiency projects, reforestation or avoided deforestation projects, or to help developing countries adapt to the effects of climate change.

The pool of buyers for these kind of bonds: insurance companies (2/3), pension funds and socially responsible investment portfolio (SRI). The triple-A rated bonds will pay 0.25 percent above Swedish government bonds.

A Picture Worth a Thousand Words

The truth hurts.

click for larger image

Gretchen Morgenson has already had her write-up in NYT about AIG and its credit default swap (CDS) machine back in February of '08. And this goes 'undetected' for months until the Feds September bailout?

Unbelievable.

Hello. Just wondering where was Paulson at that time?

Friday (after AIG Bailout) links

via [MSNBC]

Paulson to the Rescue [Fortune]

Short Financials? Now it's a No, No [MarketWatch]

Next Bailout: Detroit [Newsweek]

Investment Banking: Is there a Future? [Economist]

Sovereign Funds Retreat from Wall Street Banks [Business Week]

Paulson Argues for Need to Buy Mortgages [NYT]

Morgan Stanley In Talks with CIC [Financial Times]

Who Wants a Rolls? [Deal Breaker]

Next Stop, Sweden? [Real Time Economics]

Wall Street Meltdown Links

"DOW PLUNGES 500 POINTS"

Financials - Winners and Losers [CNBC]

The End of Wall Street [Fortune]

Fed Holds Fresh AIG Crisis Talks [Financial Times]

AIG & Your Insurance Policies [MarketWatch]

The Lehman Effect: Look at What You've Done to Dick Bove! [DealBreaker]

Is BofA Getting a Bargain in Merrill Lynch? [Deal Journal]

Before Economy Stabilizes, Housing Must [MSNBC]

WaMu is Cut to Junk by S&P on Mortgage Losses [Bloomberg]

After Lehman, Industry Eyes Shift to Aurora [Housing Wire]

Sovereign Funds, the New Players

I've been following the movement of sovereign funds (state-owned) for awhile now. These are big investment pools controlled by foreign governments. According to IMF data more than 20 countries have them in place with the top 5 funds controls about 70% of total assets. With their financial power, they easily can move money around. In fact, companies like - Citi, UBS, Credit Suisse - already in the bag. The money flows into their coffers like crazy, that it's possible to see how these sovereign funds may soon become 'the choice' for capital investments. Via Reuters.

"The rate of growth is impressive. We are talking here of about $1 trillion per year in their asset pool, generated mainly by a boom in oil prices and other commodities," he said. Most of the growth in the funds will come from Asia, although assets in Russia's National Wealth Fund could jump to as much as $619 billion by 2019 from about $32 billion at its inception in 2003, according to Jen.

More about sovereign funds, here. Slide shows on sovereign funds, here. (h/t hedge fund)

Though it's a global crisis, over here uncle Sam's get his hands tied. Liquidity is a problem. Feds poured $200B today, but it doesn't guarantee that banks will increase lending. Because banks also face with systemic margin calls, here, and here. Looks like we don't have too many choices to leverage their financial prowess, do we? No wonder the testimony from Scott G. Alvarez, Fed Reserve general counsel in Congress, supports the view that the US needs their money (cold cash) here. A sign that the US gov indeed is in deep trouble. 

Oh well, it's a small world after all.

image: Economist

Technorati Tags: US economy,sovereign funds,citibank. ubs,morgan stanley,oil prices,commodity,saudi arabia,gulf states,kuwait,bahrain,china,singapore,norway,abu dhabi sovereign funds,temasek,kia,kic

Renewable On Stimulus Package

Remember the Energy bill of 2007? That gives CAFE in and renewable a blow. Now, this is a new development. On the Senate version on the 2008 stimulus package, renewable energy gets a second chance in the finance committee for  a variety of tax credit measures, which were supposed to expire this year.

Understand that I disagree on the shot-in-the-arm approach by giving individuals (even those with higher incomes) some money to spend in order to grease the economy. However, some help for the renewable industry for massive scale production that can bring production into the main stream and its costs down are badly needed in the long run if we want to get our economy on track and lead. We're so behind everybody else in the world!

There is some truth to the statement of Bill Gross on his view on the demand-based economy. Via PIMCO.

...The $150 billion 'return to sender' deficit plan advanced by Bush and the Congress, for instance, amounts to just 1% of GDP and is labeled temporary. To understand why, consider that the productivity of our economy ultimately depends on its ability to 1) innovate, and 2) save and invest, and there is little of either in this stimulus package.

That's why we need to be focusing on innovation in moving towards a greener and cleaner economy. Without innovation, save and invest - save what - and depends heavily on the borrow-and-spend economy, the long-term outlook won't be pretty. Right now, the U.S. economy is flirting with recession. 

The renewable measures that get into the Senate plan includes 1) extension of PTC through end of 2009 2) extension of 1 year credit equal to 30% of expenditures for PV and solar water heating 3) extension of energy-efficient existing home credit 4) extends tax credit for energy-efficient appliances for 2 years and, 4) extends a credit to renewable energy bonds.

The measures 'if' (if - is a big factor here) pass from the Senate, would make it possible for the wind, solar, energy-efficient and other green businesses to create new jobs (that we desperately needed), which in turn wheels the economy again.

 

Technorati Tags: senate 2008 stimulus plan,house stimulus plan,white house,renewable energy,solar technology,Photovoltaic,solar water heater,tax credit,energy efficient appliances,energy star,renewable energy bonds,PIMCO,production tax credit

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40 Million Green Power Jobs by 2030

ASES forecasts that segment of the green economy could generate potentially 40 million jobs and $4.53 trillion revenue by 2030. They say, that one in every four Americans will be working in these industries.  In 2006 alone, 8.5 million people worked in the renewable energy and energy efficiencies industries generated $933 billion of revenue. If that's the case, that means sometime in the foreseeable future, RE and EE industries will become a major contributor for the U.S. economy.

The upside potential of the RE and EE industries is enormous.

To put this in perspective, RE&EE sales outpaced the combined sales
of the three largest U.S. corporations. Total sales for Wal-Mart, Exxon-
Mobil, and General Motors in 2006 were $905 billion.

via ASES

Things are nice and rosy but without the Fed involvement, it will be much more challenging. When we have policies in place along with favorable condition (like $100+ oil price) these factors could push the envelope even further. German's solar economy took off because of their fixed feed-in-tariff law. HT to Better Humans for Germany solar exports.

If you look at what happened the last time in Congress, the the Energy bill that has provisions supporting the use of green power.. almost D-O-A. Congress won't put all the policies in place unless 'WTP' (we the people) push hard for the change! That's just how they do biz around here :-)

Think the best thing -- that would come out of all this for the U.S. -- these are the jobs that can't be outsourced.

Source: Report is available for download via ASES [PDF].

Carbon Trading

I didn't know that carbon has a price until I read the Clean Edge 'Clean Energy Trends 2007' report. In five of the trends to watch, the number one trend is: Carbon market.  With California sets the limit for greenhouse gas emissions [GHG] along with ten (10) Northeastern and Mid-Atlantic states part of the Regional Greenhouse Gas Initiative [RGGI] - it won't be long before all of U.S. states putting a cap and regulation for GHG. Maryland is part of RGGI, why are Virginia and DC not on board yet?  

You see the size of U.S. carbon market is nowhere near the market in Europe. Why? Blame it on the Administration of President Bush.

The U.S. has fallen behind Europe in trading CO2 allowances -- ``carbon,'' in trader-speak -- because U.S. President George W. Bush has opted out of the Kyoto Protocol, saying its strict limits on emissions would prove too costly to U.S. companies.

As a result, London rather than New York has become the world capital of carbon finance. As part of the Kyoto accord, the European Union created a single market for CO2 rights on Jan. 1, 2005. Trading has exploded. Last year, the carbon market worldwide grew threefold to $30 billion, according to the World Bank. [emphasis mine]

via Bloomberg

Got that? This scheme of allowing companies to buy pollution permit so far hasn't helped Europe to curb emissions. I meant literally, a company in Europe can buy carbon credits from other country to offset their carbon pollution. It's like subsidizing pollution in another country so that a company in Europe can continue spew pollution in the air. Furthermore, EU doesn't set limit on how much credits a company can import. Here is an example, via Bloomberg. 

China Fluoro Technology exemplifies the potential for profit -- and controversy -- in the pollution market. The Chinese company makes refrigerant gases. One byproduct of that process is a potent greenhouse gas called HFC-23. Pound for pound, HFC-23 traps 11,700 times more solar heat in the atmosphere than CO2. Because China doesn't regulate HFC-23 emissions, China Fluoro can belch countless tons of gas into the air with impunity. (The U.S. doesn't regulate HFC-23 emissions, either.)

....

The project will generate 23.5 million tons of carbon- equivalent credits over six years. At current prices, China Fluoro credits are worth as much as 399 million euros. The result is that China Fluoro stands to make more money selling its pollution credits than it does selling its refrigerants. And factories in Europe and Japan can buy the credits from China rather than curbing pollution themselves.

That's in Europe. What about here in the U.S.?

Back in the U.S., Chicago Climate Exchange [CCX], claimed to be "the world's first and North America legally binding rules-based greenhouse allowance trading." They have more than 225 members currently in participation. Since it is voluntary-based, CCX make sure that NASD [National Association for Securities Dealers] have oversight on their trading system. This is how it works. Companies can trade among each other for carbon contracts using the platform. Those companies that have successfully reduced emissions below the targets, have surplus allowance that they can sell or bank. And those that pollutes more above the targets, can buy CCX contracts to help clean their acts. 

Outside the trading market, on state level, for now we have the leadership of 10 States part of RGGI along with California. Beginning in 2009, emissions of Carbon Dioxide (CO2) from power plants in the region would be capped at approximately current levels -- 121 tons annually -- with this cap remaining in place until 2015. The states would then incrementally begin reducing emissions over a 4 year period to achieve a 10 percent reduction by 2019. With the mission to reach 35% reduction by 2020. 

With that data in mind - do you see how the U.S. market for carbon trading will explode before long? Look at the volume trends below and fast forward 2 years from now. 

 

 

image: CCX

UPDATE: Nature Reports has a question about policing the voluntary carbon market. After all it's all voluntary.

 

Technocrati tags: RGGI, carbon trading, european climate exchange, chicago climate exchange, CCX, ECX, global warming, environment, pollution, acid rain, ecosecurities, al gore, clean edge, clean tech, pew center on global climate change, world bank, EU, nasd, finra, nature reports

Race to Dominate Solar Economy

The market for solar exploding. Kiplinger dedicated this month's edition for Green Life. Fortune has a story about the power of sun. Leading the race to solar domination in the world is Germany. They got to that position in a short 3 years. While Japan and US trailing are in number 2 and 3 position. The reason we are trailing Germany and Japan, unlike the US, the governments in Japan and Germany put priorities on increasing the use of alternative energy such as from solar by providing 'generous' subsidies to go green. [see image]

Today's biggest markets for solar PV are Germany and Japan, with the former accounting for more than 50% of global demand. That's not because it's always sunny in Düsseldorf; it's because government policy requires utilities to pay above-market prices for solar-generated electricity.

In the US, the cost for installing solar PV for residential uses still high and sometime it is not cost effective, unless you live in states where the cost of energy is double the national average. However, for commercial use is a different story.

image: CNN/ Fortune