CNBC Guest Blog
- Hirschhorn: Greed...or Fear
- Schork Oil Outlook: Some New Hope For Nat Gas Bulls
- Insights for Growing the Economy: the State of Entrepreneurship
- Tamminen: California Is At It Again
- Dorn: Trading Secrets and Serendipity
- Schork Oil Outlook: Falling Demand and Falling Production—The Race is On
- Busch: Ron Paul Fed Day
- Geithner Tells Banks To Make More Risky Loans?
- Farr: It Can Go Higher
- Jon Henes: Evolution From Trader to Owner - The Making of the Private Equity Hedge Fund
MOST SHARED
- How Stock Investors Can Play Holiday Travel
- Time Lapse World Series Is A Great Play
- Hirschhorn: Greed...or Fear
- My Top 10 Tech Toys for the Holidays
- iPhone a Better Gaming Platform Than Android?
- May Day For Dendreon
- 100% Mortgage Financing From USDA
- Holiday Tipping: Who And How Much
- Deep Discounts Should Make It a Very Tech-y Holiday
- Health Care Bill Nears Test Vote
- Thanksgiving Week Stuffed With Economic News
- Black Friday Deals May Not Signal Retail Comeback
- Victoria's Secret Hopes to Rekindle Desire for Lingerie
- UPS Sets New Rates For 2010
- Wall Street Jobs Slow to Return Despite Record Profits
- Investors to Goldman: Be Less Greedy
- Senate Panel to Mull Bernanke Nomination On Dec. 3
- $6M Verdict Upheld in McDonald's Strip Search Case
RSS FEED
Text Size 
Contributor
Would you like carbon insurance with that latte?
You might not hear that exact question any time soon, but don’t be surprised if companies start shifting carbon risk from their balance sheets to someone else’s, using the time-honored marketplace tool of insurance. And when that happens, expect the price of products to reflect the new reality.
China, India, and other emerging economies argue that we became prosperous using up the atmosphere and must now bear a disproportionate share of the burden to fix the problem, at least in the first few years of any new global deal.
One proposal floating around before the global climate talks in Copenhagen next month is for developed entities, like the U.S. and E.U., to buy insurance for climate change-related impacts that are likely to occur to developing nations. Flood insurance for low-lying areas of Indonesia, for example. That might be a way, some argue, to deal with the rich/poor nation divide that threatens to undermine any new global deal.
Insurance premiums may be cheaper than other forms of compensation or aid, but like any cost borne by governments or companies, it will be passed on to taxpayers or consumers.
There is also a growing movement to be more transparent about such costs, adding them as surcharges. California is flirting with car insurance paid at the gas pump, so you’re actually paying based on how much of highway system you use—and how much carbon you pump into the air—and are reminded of it each time you fill up. A carbon insurance premium could easily be included in such a gas pump surcharge so drivers pay the true cost of operating their vehicles in terms of all relevant risks, including their fair share of creating both fender benders and climate change collisions.
 |
Allstate [ALL
Loading...
()
] , State Farm, and The Progressive Group [PGR
Loading...
()
] are considering the idea. They already offer lower rates for customers who drive less than average annual mileage. Because such discounts today are based on the honor system, doing real carbon or mileage-based insurance would require technology on the car to verify the driver’s habits. That’s where innovative companies like MileMeter come in, a company already doing this in Texas.
Research by the Brookings Institution concluded that such verified pay-as-you-go insurance would incentivize motorists to combine shopping trips and otherwise cut back on fuel consumption, saving about $270 a year per car and cutting oil consumption by 4%.
Indeed there are already profits being made by insurance companies in the carbon field. Chartis Insurance and AIG [AIG
Loading...
()
] both provide insurance on carbon offset projects, essentially guaranteeing that the carbon-reducing project is completed so the buyer of offset credits will actually get the benefits purchased. As the carbon market heads towards the trillion-dollar range in the next five or six years, insuring that marketplace will also rapidly increase in value.
Swiss Re has been insuring agricultural crops against potential losses from climate change-related impacts like drought and new pest infestations. Knowing the science behind the climate change predictions, this is clearly another valuable growth area for the insurance industry.
Although I don’t know if any company has insured a coffee crop against climate change risks just yet, given the high value of the morning brew you can bet that this commodity will soon have carbon insurance percolating around somewhere. Which should put your mind at ease about always being able to get your daily dose of caffeine—even if that latte costs a few pennies more for the insurance.
______________________________
Terry Tamminen, former Secretary of the California Environmental Protection Agency, is a partner at Pegasus Sustainable Century Merchant Bank and the Cullman Senior Fellow at the New America Foundation. (Cracking The Carbon Code is a registered trademark of Terry Tamminen).
Data is a real-time snapshot *Data is delayed at least 15 minutes