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The Carbon Market

Written By Nick Hodge

Posted September 21, 2007

Over two months ago it was reported that Merriam-Webster’s most recent edition would include a slew of new words, including Bollywood, sudoku, speed dating and, everyone’s favorite, ginormous.

In the 72 days since that announcement was made and India’s movie scene became immortalized in an American dictionary, the Brits at Oxford University Press have been hard at work, deciding what new words they would add to their own reference book.

Yesterday, as reported by the UK’s Guardian newspaper, the words that will be added in the five-yearly revision of the most comprehensive dictionary of the English language were announced.

Besides adding words like manbag (a male handbag), yummy mummy (an attractive mother), garburator (a garbage disposal), and removing over 16,000 hyphens from words like fig-leaf and leap-frog, the dictionary also added some words that can serve as a barometer for how the world has changed in the last five years.

Also making the cut were the terms "carbon footprint," "green audit," and "Chelsea tractor" (a gas guzzler).

If this doesn’t illustrate just how important, relevant, and mainstream the topics of climate change and carbon emissions have become, I don’t know what will.

But I have a few ideas.

Tsk-Tsk to Climate Risk

One of the recent buzzwords in the business realm has been climate risk. And while this term didn’t make it into the Oxford dictionary, its implications are certainly being felt around the Street and beyond.

Climate risk is the monetary evaluation of the threats a company faces from issues associated with climate change. And, as is becoming ever clearer, the biggest climate risk is the emission of carbon dioxide.

That’s because, as I’ve been reporting, CO2 now has a price. It is no longer a valueless gas.

Now, when a company seeks financing, makes long-term decisions, or thinks about prospective shareholders, its carbon emissions are an increasingly important part of the process.

Emissions are already regulated in the 169 countries that ratified the Kyoto Protocol. Under the agreement, which will enter its second phase next year, countries are allocated a certain amount of emissions. If a country–or companies within a country–is in danger of overshooting its allotment, it must purchase carbon credits from an accredited distributor. This can get pricey, as each credit can cost up to $40 and some companies need to purchase hundreds of thousands of them.

Although a voluntary carbon market exists in the U.S., it’s now anticipated that with a change of administration a federally mandated scheme would be implemented. So now, just as with any other liability, the effects of carbon are being weighed in everyday business decisions.

And you can bet that companies both big and small are doing all they can to manage and mitigate this newfound risk. In fact, at last week’s Carbon Footprint Consumer Products Conference in Chicago, executives from global brands like Nike, PepsiCo, Kraft Foods and others shared their ambitions for the reduction of emissions.

It’s the opportunities and technologies that emerge from the mitigation of carbon risk that are going to make Green Chip subscribers an absolute fortune.

Carbon Fertilizes Hedges

The pockets of Wall Street fat cats are already being lined with carbon’s golden luster.

Apparently, in the course of the past couple of weeks of market turmoil, few hedge funds did what they were supposed to do–hedge. The basic idea behind a hedge fund is that they don’t move directly in line with other assets. That is, they are supposed to be more resilient to market turbulence.

But the recent mortgage crisis and the resultant market selloff thrust their negative effects onto hedge funds as well. In fact, more than two thirds of all funds lost money.

According to a story in the Financial Times given to me by Sam Hopkins, only funds vested in either freight and property derivatives or carbon credit trading withstood the market’s decline.

The title of the article was, "Carbon Credits Aid Hedge Funds."

Tell me something I didn’t know. I’ve been telling Green Chip and Energy and Capital readers for months that this industry is going to be huge. I guess the big boys are finally starting to catch on.

I’ll soon be unveiling my detailed report on how to profit in multiple ways from the burgeoning carbon market. It will be available to Green Chip Stocks members at no cost.

So take full advantage of this report and all the other profit-making opportunities Green Chip has to offer by clicking here .

Until next time,