Citigroup Inc., J.P. Morgan Chase & Co. and Morgan Stanley say they have concluded that the U.S. government will cap greenhouse-gas emissions from power plants sometime in the next few years. The banks will require utilities seeking financing for plants before then to prove the plants will be economically viable even under potentially stringent federal caps on carbon dioxide, the main man-made greenhouse gas.
I’d like to interpret this as an expectation of a Democratic victory in November, but if I remember right global warming is one of the policy areas where John McCain deviates from Republican orthodoxy. Thus it’s more likely driven by his success in the primaries, making this kind of regulation more likely no matter which party wins the presidency.
This decision is driven by the political situation but I’ve often wondered how much the scientific consensus on global warming impacts the investment world. After all, major climate change will cause a lot of economic damage and so it seems like there’s incentive for Wall Street to try to limit it. Probably, though, it’s a tragedy of the commons where the marginal coal power plant brings more short term profit than long-term costs to the individual investor. (And a lot of the fossil-fuel industry’s disinformation campaign on the issue is designed precisely to keep their stock prices up.)
Since I’m looking at some finance jobs, it would be nice to think that I could have a positive effect on this side of things, but in fact my skill-set seems more suited to high-frequency trading problems that don’t have this kind of look-ahead.