Book Shelf: Carbon Finance

November 15, 2007

CARBON FINANCE

Sonia Labatt and Rodney R. White

Wiley Finance, $101.99

Reviewed by CRAIG SAUNDERS

Climate change has serious financial ramifications and opportunities for business. In their new book "Carbon Finance," University of Toronto professors Sonia Labatt and Rodney White describe the economic ABCs of climate change.

The book is very much geared for financial and insurance professionals and business leaders, a fact to which its price tag will attest. While "Carbon Finance" is very good as a descriptive text, its lack of critical analysis is a disappointment. For journalists who have been covering the economic aspects of climate change for years, the first half of the text largely will be old hat. For others, it will be a concise and competent description of the capitalist mechanisms that have been put in place to combat climate change.

The book really gets going in its second half, when it delves into the workings of the carbon market. This most complex of trading systems began to develop after the 1997 Kyoto Protocol. But it remains fragmented. Trading hubs have developed independently in Europe and a handful of other places, including some U.S. states. In this fragmented form, it's unstable and high-risk for investors. But that is likely to change soon, according to White.

"It will coalesce. I think when Bush is replaced, things will coalesce quickly," he writes. "Once America moves, Canada will. Business is ready to go." And once the market coalesces, there will be more movement on the monitoring and reporting systems that go along with it.

"Carbon Finance" does an excellent job of laying out the mechanics and history of emissions trading, and clearly lays out what can and cannot be traded, and the various types of credits available. It does not delve into the murkier waters of retail carbon offsets being sold to consumers. Instead, it focuses on the areas that will most affect business, in particular, the financial services sectors.

The book also covers the changing role of fund managers as climate change and other environmental issues become part of corporate reporting. It covers changes in the insurance industry and new financial products coming onto the market, such as weather derivatives. For those in finance, insurance or government, "Carbon Finance" is essential reading. For journalists, it's one of the few plain language texts that effectively describes a field that is increasingly linking the environment and business beats.

Craig Saunders is a freelance writer and editor who is leaving London for the forests of Ontario.

**From SEJ's quarterly newsletter SEJournal, Fall 2007 issue.