With the US, EU, and China eyeing plans for carbon taxes, Energy Traders Get Big Money in Emissions Markets.
Big energy trading houses, long focused on deep, volatile markets such as oil and natural gas, are now bulking up their carbon-trading operations as governments around the world push to expand the market for trading carbon emissions.
Two of the world’s biggest oil companies, Royal Dutch Shell PLC and BP PLC, already have significant carbon-emissions trading arms, thanks to a relatively well-developed carbon market in Europe. Big carbon emitters such as steel producers receive emission allowances, and can buy more to stay under European emissions guidelines. Companies that fall below those limits can sell their excess carbon-emissions allowances.
The value of the carbon market could exceed the oil market’s value by 2030, possibly even by 2025 if swift action is taken and regulations are implemented, said former oil trader Hannah Hauman, who leads Trafigura’s carbon desk, which was launched in April. The company said it is recruiting to build up its team.
Glencore hired two former BP traders—appointing Jamie Wallace as head of Asia-Pacific carbon trading and Richard Mao as head of China carbon trading—to expand its carbon-trading desk.
Earlier this year, BP increased the salaries of its carbon traders in an effort to retain staffers, people familiar with the matter said. An experienced carbon trader’s base salary can be roughly $150,000 to $200,000, although a lot of compensation occurs via bonuses, traders said.
Carbon makes up about 5% to 10% of BP’s trading activities and has contributed between $50 million and $100 million to trading profits annually for the past two years, according to the people familiar with the operation. BP’s overall annual trading profits were between $3.5 billion and $4 billion during the past two years, according to a person familiar with the matter.
In the EU, the biggest polluters got the most initial credits. Then by doing a little work at reducing pollution, they get to trade their credits to someone else.
Oil companies can get credits for stopping drilling. But trading does not reduce emissions, it just shifts who produces them.
But hey, the idea has created $200,000 base salary jobs for swapping credits from one company to another.
Why Big Oil Changed Its Tune Embracing Clean Energy
- Oil companies expect to get paid to keep oil in the ground.
- This preserves dwindling reserves and drives up prices.
- The oil companies can trade energy credits making still more money.
- The money the oil companies make for not doing anything can be funnelled into taxpayer subsidized offshore wind farms etc.
Biden says his proposals will not add to inflation. Yet, every clean energy proposal has costs. Taxpayers will pay those costs.
A push to 80% clean energy by 2030 is very stagflationary.
Trump’s Global Trade War Was Over Manufacturing, Biden’s Will Be Over Clean Energy
Bidding wars for carbon traders are just a start of what’s coming.
On deck are useless and likely even fraudulent schemes once the lobbyists insert their footprint into Biden’s $3.5 trillion package.
And these plans are certain to cause trade wars as well.
For discussion, please see Trump’s Global Trade War Was Over Manufacturing, Biden’s Will Be Over Clean Energy
Please Subscribe!
Like these reports? I hope so, and if you do, please Subscribe to MishTalk Email Alerts.
Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.
If you have subscribed and do not get email alerts, please check your spam folder.
Mish
The KraneShares Global Carbon ETF (the “Fund”) seeks to provide a total return that, before fees and expenses, exceeds that of the IHS Markit Global Carbon Index (the ‘‘Index’’) over a complete market cycle. KRBN is benchmarked to IHS Markit’s Global Carbon Index, which offers broad coverage of cap-and-trade carbon allowances by tracking the most traded carbon credit futures contracts. The index introduces a new measure for hedging risk and going long the price of carbon while supporting responsible investing.
Currently, the index covers the major European and North American cap-and-trade programs: European Union Allowances (EUA), California Carbon Allowances (CCA) and the Regional Greenhouse Gas Initiative (RGGI).”
The fact sheet says that their NAV consists of carbon
allowance futures so that explains how it tracks the index. Looking at its
performance it tracks the index pretty well.