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Big Banks Buy into Carbon Offset Industry

March 30, 2008 08:54 AM
by findingDulcinea Staff
JPMorgan and Merrill Lynch have invested in the $60 billion carbon offsets sector. Skeptics ask whether offsets really help reduce global carbon emissions.

30-Second Summary

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On Wednesday, JPMorgan announced its acquisition of ClimateCare, a small British carbon offsetting company that invests in projects such as wind power, hydro power, biomass, human energy and cooking-stove projects in five developing nations.

Carbon offsets allow a consumer to pay a third party in exchange for certification that the company will remove an amount of carbon equal to the individual’s emissions, in order to cancel out the damage to the environment that carbon would cause.

Merrill Lynch has also entered the carbon trade sector, launching a new carbon-index market in response to growing demand from its clients.

While interest in the $60 billion carbon offsets market takes off, critics have raised concerns about fraud and a lack of regulation, and point out that it is unclear how well carbon offsets actually work.

“Done carefully, offsets can have a positive effect and raise ecological awareness. But a close look at several transactions … reveals that some deals amount to little more than feel-good hype,” says Business Week.

Marc Gunther at The Huffington Post advises careful consumers to look for credible third-party endorsements and to understand that offsets are never as effective as simply reducing consumption in the first place. Some companies follow voluntary standards such as the Code of Best Practice for Carbon Offsetting recently proposed by Britain. However, offset traders vary in how stringently they follow such guidelines, according to a recent consumer guide by the advocacy group Clean Air Cool Planet.

Offsets can help finance renewable energy projects that otherwise would not get built, said Chris Berendt, director of clean energy and environmental markets for Pace Global Energy Services, a global energy consulting firm.

“When done right, there’s real value and a real difference made,” Berendt said.

Headline links: ‘JPMorgan Acquires Carbon Offset Firm ClimateCare’

Related Topics: Airline offsets and the U.K. code of practice

Opinion & Analysis: Is offsetting effective?

Reference: Understanding offsets and measuring your carbon footprint

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