Monday, March 30, 2009

Taxpayer trillions for US carbon trading scam at stake. Who's handling YOUR 'carbon portfolio'?

March 27 (Bloomberg) -- "U.S. Representative Edward Markey says his committee should be in charge. No, says fellow Democrat Collin Peterson, this one should fall under my panel.

Markey and Peterson are jockeying for control of the biggest regulatory plum to hit Washington in years: a proposed system for trading carbon-dioxide permits that would be

Depending on which lawmaker prevails, the market would be monitored by the Federal Energy Regulatory Commission, which is overseen by a subcommittee headed by Markey,

  • or

the Commodity Futures Trading Commission (CFTC) under the supervision of the Peterson-led House Agriculture Committee.

The winning agency would set the rules for a market that could reach $1 trillion in trades annually by 2020, according to New Carbon Finance, a London research firm. The victor also would influence the operations of companies from American Electric Power Co., the biggest U.S. producer of electricity from coal,

  • to Goldman Sachs Group Inc., which would compete with other banks
  • to handle companies’ carbon portfolios.

“All the big financial firms would look to provide services to their clients to help them manage their risks in the carbon market,” said Tim Profeta, director of Duke University’s Nicholas Institute for Environmental Policy Solutions in Durham, North Carolina.

The maneuvering is under way even as President Barack Obama’s climate-change goals await congressional action. The proposal, part of his projected $3.6 trillion budget for 2010, would

  • create a cap-and-trade program to limit greenhouse gas emissions.
  • Polluters would buy and sell
  • government-issued emissions permits
  • on a market.

‘Real Opportunity’

  • “Some believe this will create the

largest new derivatives market in the world,” Senator Debbie Stabenow, a Michigan Democrat, said at a hearing last month. “It’s a real opportunity to design a transparent, efficient carbon market.”

An indication of whether FERC or the CFTC has the upper hand could come as early as next week, when a trade group including American Electric Power, Goldman and trading firm Natsource LLC may issue its recommendation.

“Most of the financial players in the market probably have more experience dealing with the CFTC, while a lot of the energy companies have more experience with the FERC,” said Dirk Forrister, who heads

  • He is also a managing director of
  • Natsource, a New York fund manager and carbon-credit buyer.

Michael DuVally, a Goldman Sachs spokesman in New York, declined to say which agency his company will support.

“We haven’t taken any public position” on which agency should be the regulator, said Pat Hemlepp, a spokesman for Columbus, Ohio-based American Electric.

Markey, Wellinghoff

Massachusetts Representative Markey, who heads the House Energy and Environment Subcommittee, says FERC’s experience makes it the obvious choice.

“The Federal Energy Regulatory Commission has the historical expertise in the energy and electricity marketplace, and it is the proper venue for that regulatory responsibility,” Markey told reporters on March 3.

FERC’s chairman, Jon Wellinghoff is less enthusiastic. “I have a little bit of

  • trepidation about a carbon market,” Wellinghoff said in an interview.

“It really goes beyond the traditional boundaries of what FERC has regulated in the past.

  • There’s a number of other federal agencies that may be in a better position to oversee that.”

If Congress does give his agency the role, “I assure you we will do a very good job,” Wellinghoff said.

  • Peterson, of Minnesota,
  • already has pushed through his committee legislation that would give

the CFTC authority over any national carbon trading system.

‘Already Regulating’

  • “The CFTC is already regulating markets where carbon trading is occurring and,

as such, has the most experience with these markets,” Peterson said in an e-mailed statement. “I would prefer an experienced cop over a rookie any day.”

The lawmakers whose committee wins out would gain clout as well as the

  • potential for campaign contributions from participants in the new market,
  • said Bryan Mignone, director of research for the Brookings Institution’s energy security initiative.

There’s money riding on this; that may in fact explain some of the political posturing,” Mignone said.

Campaign Contributions

Employees of oil and gas companies gave $2 million to the House Energy and Commerce Committee,

  • which oversees their industry, in the 2008 elections, according to the Washington- based Center for Responsive Politics.
  • That compares with $1.1 million to the House Agriculture Committee,
  • which has jurisdiction over oil and gas futures markets through the CFTC.

Electric utility employees gave $2.8 million to the Energy and Commerce panel, which oversees FERC, and $958,202 to the Agriculture Committee.

“Campaign contributions are the furthest thing from my mind,” Peterson said. “I’m more interested in getting the right outcome.”

Eben Burnham-Snyder, a Markey spokesman, didn’t respond to a voice-mail message seeking comment.

according to estimates from consulting firm Point Carbon in Oslo. The Brussels-based European Commission regulates the market, and each of the EU governments has a role.

Progress Energy

Proper regulation of a U.S. carbon market is particularly important “given what’s happened in financial markets over the last year,” said William Johnson, chief executive officer of

  • Progress Energy Inc. of Raleigh, North Carolina, which operates utilities in three Southeastern states
  • and would be a buyer and seller in the carbon market.

He didn’t express a preference in the debate over FERC or the CFTC.

The CFTC was formed in 1974 to police commodity futures and options, most related to agricultural products. The agency’s oversight now extends to futures contracts on products from pork bellies and crude oil to interest rates.

  • Gary Gensler, Obama’s nominee to head the CFTC, said during a Senate confirmation hearing on Feb. 25 that he would welcome having the carbon market under the agency’s purview.

Wholesale Power

FERC, set up in 1977, regulates wholesale power sales and the interstate transmission of electricity, natural gas and oil. It deals mostly with the trading of physical products on spot markets rather than futures contracts.

Senator Jeff Bingaman, a New Mexico Democrat and chairman of the Senate Energy and Natural Resources Committee, told reporters this month that his panel “hasn’t settled” on who should regulate a carbon market. Neither has the Obama White House, according to Carol Browner, Obama’s chief of environmental and energy policy.

Browner said in an interview. “I’m a lawyer, but I wouldn’t want to make an argument about which it is.” " via

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