February 6, 2008

Wall Street rethinks coal

Posted by Arcane Gazebo at February 6, 2008 9:53 PM

Via Stoat, the Wall Street Journal reports that some major investment banks are anticipating new regulations on carbon emissions:

Citigroup Inc., J.P. Morgan Chase & Co. and Morgan Stanley say they have concluded that the U.S. government will cap greenhouse-gas emissions from power plants sometime in the next few years. The banks will require utilities seeking financing for plants before then to prove the plants will be economically viable even under potentially stringent federal caps on carbon dioxide, the main man-made greenhouse gas.

I'd like to interpret this as an expectation of a Democratic victory in November, but if I remember right global warming is one of the policy areas where John McCain deviates from Republican orthodoxy. Thus it's more likely driven by his success in the primaries, making this kind of regulation more likely no matter which party wins the presidency.

This decision is driven by the political situation but I've often wondered how much the scientific consensus on global warming impacts the investment world. After all, major climate change will cause a lot of economic damage and so it seems like there's incentive for Wall Street to try to limit it. Probably, though, it's a tragedy of the commons where the marginal coal power plant brings more short term profit than long-term costs to the individual investor. (And a lot of the fossil-fuel industry's disinformation campaign on the issue is designed precisely to keep their stock prices up.)

Since I'm looking at some finance jobs, it would be nice to think that I could have a positive effect on this side of things, but in fact my skill-set seems more suited to high-frequency trading problems that don't have this kind of look-ahead.

Tags: Energy, Politics, Science
Comments

What impacts the financial markets is the jungle beat out there in the world. Wall Street, to paraphrase an old saw, reads the polls too. When James A. Baker III can stand up in public and decry global warming, as I heard him do about three years ago, the game is up for the deniers. The next Administration will take climate change very seriously regardless of party. (And my new Mini gets 40 mpg highway, I'll have you know.)

Meanwhile, now that she is running low on dollars, Hillary is looking more and more like a busted flush.

Posted by: JSpur | February 7, 2008 8:12 AM

On the other hand, I see breaking news that Romney is suspending his campaign. So the Republican contest is down to two paupers and Ron Paul. Go figure.

Posted by: JSpur | February 7, 2008 9:41 AM
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