The following interview is based on a story that we recently ran about JPMorgan “Cooking up Carbon Credits” (that you can view here: JPMorgan Chase Subsidizes Stoves in Africa to Earn Carbon Credits).
The recent news about JPMorgan “Cooking up Carbon Credits” underscores the booming carbon market. It seems the carbon market is only going to get bigger. What do you think will happen as more capital gets into this market?
I do agree that the carbon markets will get bigger and that more capital will become available for carbon credits. The regulated markets will blossom once a legislated cap and trade system comes into force in the US and the voluntary markets will also grow as awareness of climate change increases. More capital will enable additional offset projects to be funded and will bring competition into the market which will increase the overall quality of offsets.
JPMorgan earns carbon credits by subsidizing stoves in Africa. These carbon credits are then sold to companies at a price that is reportedly higher than the retail value of the stove. Do you think such initiatives should be predominantly revenue driven?
I disagree with the concept of financial additionality because profitability is what motivates business decisions. If an emissions reduction project is limited to breaking even it is much less likely to be funded than another investment opportunity. I believe that, with plenty of competition, the free market will determine both a fair price for various projects as well as what level of quality is acceptable.
Do you think government intervention to subsidize carbon credits/cap credit prices will encourage more companies/individuals to offset their emissions?
I don’t believe that government subsidies would be the most effective means for stimulating the market. The government needs to set performance standards and emissions caps that are challenging to meet and let the free market determine the most efficient way of achieving them.
Pablo Päster
VP, Greenhouse Gas Management Innovations