Tag Archives: china
World Bank Looks at Global Carbon Pricing Systems
Posted June 3, 2013 It’s ironic considering all the attention on the struggles of the EU Emissions Trading System, but today over 40 national and 20 sub-national government jurisdictions have either implemented or are considering carbon pricing mechanisms. Global emissions trading schemes map via World Bank This wide-ranging assessment comes from no less an authority than the World Bank, which announced their findings this week in a new report “ Mapping Carbon Pricing Initiatives: Developments and Prospects. ” The Bank’s findings once again underling the growing momentum toward an interconnected global carbon market working to fight climate change and spur the transition to a global clean energy economy. Lessons Learned From EU Struggles Despite international failure to establish an international climate deal through the United Nations, the Bank sees individual carbon pricing initiatives developing faster than ever before – and learning lessons from the EU ETS . These markets are taking shape at the same time international prices on carbon are at historic lows and the prospect of coordinated international emissions reduction measures uncertain. “Even as the first generation of the carbon market stutters…it is progress at the country level that gives hope,” said Rachel Kyte , World Bank vice president for sustainable development. “Carbon pricing is emerging and carbon markets have a future.” Multiple systems feature novel system designs like pricing stabilization mechanisms to make them flexible and adjustable to changing economic situations that may have been unforeseen when they were created. The current glut of allowances and low prices in the EU ETS has been attributed to system inflexibility to handle reduced allocation demand after the economic recession. EU ETS allowance price chart 2008-2013 via World Bank Carbon Pricing Covering 20% Total Global Emissions These emerging schemes could make a massive impact on global emissions. As of 2013, the countries with functioning systems or carbon pricing mechanisms scheduled to start within the next few years collectively emit 10 gigatons of CO2 per year – equal to about 20% of global emissions, or the combined annual emissions of the US and EU. The Bank report highlights cap and trade systems in the EU, California, Kazakhstan , New Zealand, Quebec, the Regional Greenhouse Gas Initiative , and regional markets in Japan, as well as South Korea’s developing system . In addition, carbon taxes are cited in Australia , British Columbia, Denmark, Finland, Ireland, Norway, South Africa , Sweden, Switzerland, and the United Kingdom. Even more promising, the Bank’s report does not fully consider China’s fledgling system , which has begun pilot programs in major cities and will roll out nationally in 2020. “If China, Brazil, Chile, and the other emerging economies eyeing these mechanisms are included, carbon pricing initiatives could…cover almost half of total global emissions,” said Niklas Hohne of report co-author Ecofys. Severe Beijing air pollution image via Shutterstock Linkages And Expanded Targets Boost Value The Bank report also recognizes the value of international system linkages in stabilizing individual systems long-term. Linkages between the EU and Australia and California and Quebec , and potentially the EU and China , will create efficiencies and benefits for each system. However, the Bank cautions linkages need to be carefully timed to allow new systems to become established before connecting to other schemes. Bank analysts also note the growing trend of existing or scheduled systems expanding coverage of domestic emissions, with Australia and Korea now targeting 60% coverage, California eyeing 85% coverage , and New Zealand targeting 100% coverage within a few years. “There may not be a one-size-fits-all,” said Alexandre Kossoy , World Bank senior financial specialist. “But it is clear the foundation of the first generation of market-based instruments is informing what will constitute the future landscape of carbon pricing.” Does Hope Spring Eternal? Ultimately, it all comes down to climate, the ability to fund our transition to a sustainable future, and our inability to come to international agreement on climate policy. World Bank President Jim Yong Kim recently said climate change presents “serious consequences to the economic outlook” of international economies, and the Bank’s report acknowledges current emissions put us on the pathway to a devastating 3.5-4 degree Celsius temperature rise by 2100. If enough carbon pricing systems are online or planned by the next United Nations climate meetings, the power of international carbon markets as an economic and environmental stimulus may be too hard to ignore. Continue reading
If A Tree Falls In The Forest, Can You Make A Little Money?
By John Wasik CHICAGO | Mon Jun 3, 2013 4:42pm EDT (Reuters) – If a tree falls in the forest, can you make a little money? As the U.S. housing rebound continues, you can watch the value of your real estate rise. In addition you can reap gains from resource companies that own and process timber. Since most U.S. homes are still framed with wood, timber becomes a more valuable commodity as new construction booms. Home prices gained the most in seven years in March, according to a recent S&P Case-Shiller housing index report. Housing starts in April rose 16 percent over the previous month with new building permits up 14 percent, according to the U.S. Census Bureau. North American sawmills are running at the fastest pace in six years, up nearly 7 percent over last year, according to CIBC World Markets , a Canada-based investment bank. Growth in China is also contributing to the rebound. More than 60 percent of log exports from the Pacific Northwest head to the People’s Republic. Timber is also becoming more scarce as forests shrink. As a commodity, it provides an inflation hedge, too; the S&P Global Timber & Forestry index has produced an annualized return of nearly 7 percent over the past three years through April 30. The current Consumer Price Index is running at an average 1 percent. Why invest in timber and related resource companies instead of the obvious play in homebuilder stocks ? Those companies have been rallying for more than a year and are pricey. The SPDR S&P Homebuilders ETF, for example, a fund that holds most of the major home-construction companies, is up more than 50 percent over the past year through Friday, almost double the price of a consumer cyclical index. That portfolio’s price- earnings ratio – what investors are willing to pay for a dollar of expected earnings – is 20, compared to 14.4, for the SP 500. The underlying S&P index for the timber sector has climbed more than 31 percent over the past year through May 31 compared to a nearly 50-percent gain for the S&P Homebuilders Index. The iShares Global Timber and Forestry Index ETF (WOOD), has p/e of 18; that’s not a bargain price either, but timber stocks are a better value now relative to homebuilding stocks and may have more upside. REGIONAL VIEW Most timber companies specialize in specific regions where they own or lease properties. But to obtain global diversification, it’s best to consider one of two exchange-traded funds on the market that hold timber, packaging and real estate investment trusts (REITs) that own lumber resources. The Guggenheim Timber ETF, holds major producers like Weyerhaeuser Co and International Paper Co. It tracks the Beacon Global Timber Index, which holds companies that own or lease forested land or produce wood-based products. More than 40 percent of the companies are based in greater Europe or Asia. It’s up 8 percent year to date through May 31 and gained 25 percent last year. As an alternative, the iShares timber ETF mentioned above has more than 60 percent of its holdings in the Americas, including Plum Creek Timber Company Inc and Potlatch Corp . The iShares fund is a better deal on expenses than the Guggenheim product, charging 0.48 percent annually for management, compared to 0.70 percent for the Guggenheim fund. It’s gained 4 percent year to date and 23 percent last year. Of the two ETFs, the iShares fund offers more total international exposure, including 13 percent stakes in Brazilian companies and 11 percent in Japan , says Eric Dutram, ETF analyst at Zacks Investment Research in Chicago. Either way, the two funds are reasonably priced, he said. Many timber companies give you a bonus if they’re vertically integrated. They could mean they are producing value-added products like rayon, packaging or paper, which also would benefit from a broad economic recovery. These companies may also own or lease land that may result in other mineral plays such as petroleum or natural gas . Keep in mind that timber trends can cut the other way. As funds specializing in a handful of commodities that rise and fall directly with economic demand, these ETFs are not for nervous investors. Guggenenheim Timber lost nearly half its value in 2008 and has a 32-percent five-year standard deviation, a volatility gauge. That compares to 20 percent for a world natural resources stock index. If the housing market goes south again, then these ETFs will suffer. Consider them only as small parts of a larger portfolio and not large holdings. (The author is a Reuters columnist and the opinions expressed are his own. For more from John Wasik see link.reuters.com/syk97s ) (Follow us @ReutersMoney or here Editing by Linda Stern and Andrew Hay) Continue reading
Column: Housing Rebound Boosts Timber Stocks
By John Wasik CHICAGO | Mon Jun 3, 2013 4:42pm EDT (Reuters) – If a tree falls in the forest, can you make a little money? As the U.S. housing rebound continues, you can watch the value of your real estate rise. In addition you can reap gains from resource companies that own and process timber. Since most U.S. homes are still framed with wood, timber becomes a more valuable commodity as new construction booms. Home prices gained the most in seven years in March, according to a recent S&P Case-Shiller housing index report. Housing starts in April rose 16 percent over the previous month with new building permits up 14 percent, according to the U.S. Census Bureau. North American sawmills are running at the fastest pace in six years, up nearly 7 percent over last year, according to CIBC World Markets , a Canada-based investment bank. Growth in China is also contributing to the rebound. More than 60 percent of log exports from the Pacific Northwest head to the People’s Republic. Timber is also becoming more scarce as forests shrink. As a commodity, it provides an inflation hedge, too; the S&P Global Timber & Forestry index has produced an annualized return of nearly 7 percent over the past three years through April 30. The current Consumer Price Index is running at an average 1 percent. Why invest in timber and related resource companies instead of the obvious play in homebuilder stocks ? Those companies have been rallying for more than a year and are pricey. The SPDR S&P Homebuilders ETF, for example, a fund that holds most of the major home-construction companies, is up more than 50 percent over the past year through Friday, almost double the price of a consumer cyclical index. That portfolio’s price- earnings ratio – what investors are willing to pay for a dollar of expected earnings – is 20, compared to 14.4, for the SP 500. The underlying S&P index for the timber sector has climbed more than 31 percent over the past year through May 31 compared to a nearly 50-percent gain for the S&P Homebuilders Index. The iShares Global Timber and Forestry Index ETF (WOOD), has p/e of 18; that’s not a bargain price either, but timber stocks are a better value now relative to homebuilding stocks and may have more upside. REGIONAL VIEW Most timber companies specialize in specific regions where they own or lease properties. But to obtain global diversification, it’s best to consider one of two exchange-traded funds on the market that hold timber, packaging and real estate investment trusts (REITs) that own lumber resources. The Guggenheim Timber ETF, holds major producers like Weyerhaeuser Co and International Paper Co. It tracks the Beacon Global Timber Index, which holds companies that own or lease forested land or produce wood-based products. More than 40 percent of the companies are based in greater Europe or Asia. It’s up 8 percent year to date through May 31 and gained 25 percent last year. As an alternative, the iShares timber ETF mentioned above has more than 60 percent of its holdings in the Americas, including Plum Creek Timber Company Inc and Potlatch Corp . The iShares fund is a better deal on expenses than the Guggenheim product, charging 0.48 percent annually for management, compared to 0.70 percent for the Guggenheim fund. It’s gained 4 percent year to date and 23 percent last year. Of the two ETFs, the iShares fund offers more total international exposure, including 13 percent stakes in Brazilian companies and 11 percent in Japan , says Eric Dutram, ETF analyst at Zacks Investment Research in Chicago. Either way, the two funds are reasonably priced, he said. Many timber companies give you a bonus if they’re vertically integrated. They could mean they are producing value-added products like rayon, packaging or paper, which also would benefit from a broad economic recovery. These companies may also own or lease land that may result in other mineral plays such as petroleum or natural gas . Keep in mind that timber trends can cut the other way. As funds specializing in a handful of commodities that rise and fall directly with economic demand, these ETFs are not for nervous investors. Guggenenheim Timber lost nearly half its value in 2008 and has a 32-percent five-year standard deviation, a volatility gauge. That compares to 20 percent for a world natural resources stock index. If the housing market goes south again, then these ETFs will suffer. Consider them only as small parts of a larger portfolio and not large holdings. (The author is a Reuters columnist and the opinions expressed are his own. For more from John Wasik see link.reuters.com/syk97s ) (Follow us @ReutersMoney or here Editing by Linda Stern and Andrew Hay) Continue reading
