So, earlier this week I dropped in to the Carbon Finance & Investment Summit , "Where Carbon Players Come To Do Business." Okay. I sat in on two sessions: Carbon Funds' Plans And Strategies In The Carbon Space and Private Equity And Hedge Funds' Plans And Strategies In The Carbon Space. Of the twelve worthy gents on these two panels, only one represented an organization that was not for profit: the multilateral development bank known and loved (sometimes) as the World Bank. Not incidentally, their FAQ on carbon finance is worth seeing. They keep the official tab on carbon trading and estimate that last year $22 billion was traded. That number has been rising quickly and will continue to curve upward as more regulatory regimes come on line: California and her western partners, RGGI in the Northeast, and eventually, inevitably a market mandated by federal legislation. (Most of one group of panelists picked 2009 for the advent of a U.S. cap-and-trade system and its being brought on-stream within a year or two after that.) Most of these folks, like the USCAP folks, are leery of several different regulatory regimes and are hoping that a national system will happen sooner rather than later. Beyond that, they hope for a well-integrated international regime that will allow transparency, and "fungibility," as one person put it, and long time frames for the environments in which their investments will be made. One handout, a policy brief from the Milken Institute, describes a program design for U.S. cap-and-trade. (On-line registration is required to get the brief in pdf, but the process is quick and free.)
Now these "players" are not all in carbon trading alone. In fact, many of them are in renewable energy finance and other less risky ventures. "Technological risk" was a recurring theme in the two hours of discussion I heard. They're looking at all sorts of things like sequestration and storage projects; all manner of power plants, including nukes and coal, as well as hydro; methane recovery; and work in the steel and cement sectors. (Go to the event brochure above and find the scores of companies that have interests in all this activity and what they're doing.)
So the good news is that there's all these billions of dollars chasing good projects. Now far be it for me to impugn the profit motive. Seriously, I come at Adam Smith from the view that he held the chair of Moral Philosophy at Glasgow previously held by his teacher, Francis Hutcheson, a seminal force in the Scottish Enlightenment. (For a really great read, try How the Scots Invented the Modern World.) Adam Smith is the father of modern political economy, and I wholly endorse his guiding principles. However, it has to be remembered that these included a generous wariness for the potential rapaciousness of human economic activity. So, when a room of 500 Western capitalists, controlling a truckload of money, are told that their common goal is "return on capital," that legislators need to be "educated," and that government never invented anything useful (offered as a perfectly gratuitous response to an innocent question about the influence of government R&D on technology), then I start to get a little nervous. I get nervous about the implications for public policy if the financial industry forgets that it's actually not all about "return on capital" but about building sustainable, fair and prosperous societies where acute income inequality is something devoutly to be avoided.
'Nuff said.
