NEW YORK, Jan 17 (Reuters) - Capping and trading carbon emissions will not be enough to fight output of the gases blamed for warming the planet, the managing director of Goldman Sachs’ (GS.N) U.S. carbon emissions desk said on Thursday.
The bank’s carbon head Ken Newcombe was emphatic that cap and trade has huge potential in the United States, the world’s largest energy consumer.
But government research and development budgets should also be boosted to complement cap and trade’s potential to spur innovations and investments in carbon-cutting techniques, he said.
“I’m not at all convinced from what we’ve seen internationally that a cap and trade regime and a price on carbon is going to motivate investment in truly transformational technologies,” Newcombe said at a carbon policy forum in New York.
Capturing carbon dioxide emissions at coal and natural gas-burning power plants for permanent burial underground is one unproven technology that is expensive, while other technologies, such as cutting vehicles emissions, may also need research funds.
The U.S. Congress is considering several bills that would aim to cut emissions by capping them and creating a market to trade credits representing them,
So far, the center of global climate trade has been based in Europe, which ratified the Kyoto Protocol and set up mandatory emissions trade. Billions of dollars worth of emissions credits have traded hands in Europe, but red tape has also delayed trade in carbon offsets, or investments in emissions reductions in developing countries.
Banks like Goldman Sachs and Credit Suisse CSGN.VX have formed New York climate desks ahead of U.S. regulations, in part because the country could be a big buyer of global credits if world carbon markets eventually link up.
“A remarkable transformation is about to take place,” said Newcombe. “The U.S., which is not significant in the global carbon market today at all, (and engages in) purely voluntary trade...will become not only a major player in its own right, but potentially a major source of demand in the Kyoto-based markets,” he said.
Ten of the largest U.S. power utilities that have coal-fired plants emit 1 billion tonnes of carbon dioxide annually, he said. “The U.S. in 10 utilities alone, matches the scale of a relatively mature, although emerging global carbon market,” Newcombe said.
Among other things, the U.S. carbon desks have looked at buying voluntary and regional emission reduction credits that have been generated ahead of national regulations, in the hopes that the credits would increase in value as time goes by and after a national scheme forms.
A Goldman source told Reuters that the bank’s carbon desk is “big, but not too big” explaining that it was being set up to allow many of its commodities traders to flow through it, and return when needed.
Ray Kopp, the director of the climate change program at the nonpartisan Washington-based think tank Resources for the Future, echoed Newcombe, saying that any U.S. climate change policy has got to be followed up with more robust research, development and deployment programs for clean technologies.
He said some federal research and development programs have had a mixed record, but that broadly, ones that have been insulated from political favors, have been effective. (Editing by Marguerita Choy)