Sunday, June 18, 2006

The Bank of New York

In Environmental and Ibanking news, The Bank of New York has added a voluntary carbon trading unit.

My only concern is enforcement. With the US not playing with the other kids in the playground, someone needs to conduct audits of these firms to make sure they are actually reducing their emissions. Ironically, I think the free-markets are taking care of that on their own because Ibanks like The Bank of New York through their clearing house unit Pershing, stand to lose a lot of money if firms are not playing by the rules. My guess is they will require some sort of auditing to make it happen

The Bank of New York has a history of innovation, so it does not surprise me that they are the ones leading the pack. They were founded by none other then Alexander Hamilton, after all.

I think this is great for US firms, though. I’ve been worried for a while after Kyoto came out (read: rejected) that the US would fall behind in carbon emissions trading and carbon reduction technology. I still think we have a long way to go, however. Flooding the market with more credits the market can handle will drive the price down and render Kyoto pointless. They key is scarcity, which means the US needs to implement its own caps.

I also see this spontaneous trading as a partial validation of my own proposal which I’ve blogged about here.