The business of climate change

New York-based merchant bank Lehman Brothers have produced an excellent overview of the business and economics of climate change (PDF). If you have any interest in the economics of dealing with climate change, and want an informed overview of the drivers of political and commercial change, this is a very good place to start. I don’t agree with everything they have to say (they’re far too dismissive of electric vehicles, for instance – I reckon EVs have the potential be a disruptive technology), but the sectoral and country by country analysis of investment opportunities is fascinating, and their general take on the issue is very close to my own. From the conclusions:

The size of the carbon market globally, as measured by the value of permits issued, could, on a conservative estimate, be over $100bn by 2020 or thereabouts. This assumes that the United States, Japan, and China join the EU in moving to an emissions trading scheme covering around 50% of their total emissions. Annual turnover would be a multiple of that figure. This compares with the US Treasury market which currently stands around $2 trillion.

They put the chances of an international deal including China and India at 75% (up from 50% in an earlier report), and expect share prices to begin to track relative carbon intensity – with carbon-light companies doing better. Recommended reading.

3 thoughts on “The business of climate change”

  1. Gareth
    Since I am about to start a PhD looking at the challenges of NZ transitioning to a renewable energy based transport system I would be interested hearing more, or do I have to buy the book 🙂
    Cheers Doug

  2. You should read the book, of course… 😉

    If you search this site for EV stories, you’ll find a few pointers. There are some exciting vehicles being designed and built by small companies, using different approaches and different battery technologies. They’re mainly aimed at the top end of the market (sportscars etc), but they demonstrate that EVs don’t have to be boring!

    People tend to underestimate the advances being made in battery tech: one good place to monitor what’s going on is MIT’s Technology Review, another is AutoblogGreen. Andrew W provided a good link in earlier EV comment too…

    I think disruptive is appropriate because the world’s big car makers have huge amounts of capital tied up in fossil fuel technology and manufacturing. The exciting EVs are coming from start ups with big ideas. Given the pace of technological advance, and the long time it takes a big car company to produce a new model, there’s a chance one or two of the little guys could have a real impact (especially if action on cutting emissions speeds up).

    NZ could make a killing with an electric tractor…

  3. Thanks for that and yes I will buy the book. However, as my background is in (sustainable) energy policy my first question is as always – where is the electricity going to come from? Which is part of what I hope to address in my return to studentdom.

    Cheers Doug

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