Upside: Wall Street to Trade Carbon in '08 - Way Ahead of Federal Law

The prevailing mantra in Washington on climate law is that regulation is going to hurt the economy, and so lobbyists and big polluters have negotiated generous carbon credit handouts by crying for protection. A move by Nymex Holdings Inc. and a group of Wall Street trading houses points to something you rarely hear mentioned -- the upside of climate regulation.

The money folks know a good business opportunity when they see it -- so their announcement that they're jumping into the carbon market cuts against the grain of the fear-mongering opposition to climate law.

Here's the message from Wall Street: we're tired of waiting for federal law, we're going to help put a price on carbon because we want "in" on the global action.

Get a load of this headline from today's Nymex press release:

NYMEX and Other Major Market Participants to Form the Green Exchange, the World's Most Comprehensive Environmental Marketplace

NYMEX Leads Venture with Evolution Markets, Morgan Stanley, Credit Suisse, JPMorgan, Merrill Lynch, Tudor Investment Corp., ICAP, and Constellation Energy

New Exchange Will Offer Contracts for Carbon, Renewable Energy, and Other Major Environmental Commodities

Here's some what you are going to be able to buy and sell at this new exchange:

• carbon allowances (EUAs) under the European Union Emissions Trading Scheme
• carbon credits (CERs) under the U.N. Clean Development Mechanism
• verified greenhouse gas emission reductions (VERs/VCUs) used in accordance with voluntary carbon standards.
• contracts for U.S. SO2 and NOx emissions allowance trading programs
• contracts for national Green-e™ certified voluntary renewable energy certificates (RECs)

The founders are now talking with other banks, brokers, hedge funds, and energy and industrial corporations to kick start this market, launching the first quarter of next year. Aside from access to the European carbon market, the exchange will make it possible to trade in carbon credits from China, India and Brazil.

In 2009, the first US regional carbon trading mechanism -- between New York and nine other Northeastern states -- will launch. Two other regional initiatives in the US are in the works - the Western Climate Initiative and Midwestern Climate Initiative.

Here's the money quote from Andrew Ertel, CEO of Evolution Markets, a founding partner:

Leveraging financial markets is an essential part of addressing environmental challenges such as global warming.....We've identified a set of contracts that address climate change, encourage renewable energy development, and tackle air quality. The Green Exchange will be more than a financial marketplace. It will be an engine behind global efforts to improve the environment.

Looks like it's full speed ahead on a global market that's going to put a price on carbon, and lots of people are looking to turn a honest buck with this latest engine of economic development.

Is anyone in Washington paying attention? Here's the magic word: UPSIDE.

And this just in from IBM -- in my father's day, the company ticker symbol stood for I Bought Money. The company is placing a bet on emissions trading too, and making it easier to do. They're announcing a new software offering called GreenCert. It's an application that they say can accurately measure corporate efforts to reduce greenhouse gas emissions.

The software provides a high-quality offset that is transparent and reproducible, and creates an audit trail. In essence, it's a Quickbooks for carbon.

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