![]() The problem, though, is that their customers are primarily dependent on the price of the underlying credits and the outlook there looks questionable for the reasons discussed. It is a “picks and shovels” play they provide the required infrastructure and will have a business no matter which particular company or technology eventually turns out to be the winner in the race to remove carbon from the atmosphere. That leaves us with Aker Carbon Capture ASA ( AKCCF), a carbon capture infrastructure company that is a spin off from Aker’s wider energy infrastructure company. There are a couple of more focused possibilities, but they too have their downsides. The biggest investors are companies like OXY and the big oil companies, who see it as a way of potentially future-proofing themselves and offsetting the negative impact of environmental concerns on their businesses. The other problem is that there are very few investments available that are purely in carbon capture or even concentrated in the area. Economics 101 tells you that a big increase in the supply of a commodity without a commensurate increase in demand will push prices down, so big money pouring into carbon capture and offsets will have a negative impact on futures prices. The big investments being made now are in new and improved ways of removing and capturing carbon, meaning that the supply of credits is increasing. The question for individual investors that may be reading this is, “If these things and this technology are real, and if Buffett, Gates and Bezos are investing, how can I get involved?”įirst off, buying carbon credit futures, or the ETF ( KRBN) that tracks them, is not the way to do it. Those credits are now fully commoditized, with there even being an active futures market in them. To do that, the carbon reduction activities have to be assigned a value, and that is done through an active market in “carbon credits,” where each credit represents one metric ton of carbon dioxide removed from the atmosphere. Given that, companies that do take carbon out of the atmosphere by owning rainforests that do it naturally, or by technology that cleans the air, or that captures and stores polluted air should be rewarded, with the costs borne by those that emit the carbon. The theory behind carbon credits is simple: It is based on the fact that climate change is driven by net global carbon emissions, and the acceptance that, for now at least, moving completely away from fossil fuels is not practical for any country or even company. If Warren Buffett, Bill Gates and now Jeff Bezos believe in carbon capture and are using purchased credits to offset their own emissions, maybe we should all pay attention. It has also attracted more direct investment from names like Microsoft ( MSFT) and, more recently, Amazon ( AMZN). It is one of the factors behind Berkshire Hathaway ( BRK-B) taking a large position in Occidental Petroleum ( OXY), an oil and gas company that has invested a lot in carbon capture as the possible next stage of their evolution. Over the last decade or two, carbon capture and carbon credits have become legitimate businesses with some very big investors getting involved. ![]() Their tendency to get involved in booms that inevitably turned into busts convinced me that carbon capture would go the same way. So when they told me a while ago about their plan to get involved in carbon credits by buying some rainforest somewhere, it made me a bit skeptical of the whole business. They made a lot of money on some things, but lost just as much in others, such as when they held on to big positions in Dubai real estate just a little too long. What they have typically done is to chase the latest trend in business and finance, sometimes timing their exit correctly, sometimes getting burned. I have a couple of friends from my days in the interbank forex market who have been involved in a slew of business ventures together.
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