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Goldman Sachs Takes Big Gamble on Growth of Carbon Offset Market

The carbon offset market took a big jump today with the alliance between E+Co and Goldman Sachs (GS). Goldman has agreed to purchase the majority of E+Co’s carbon offset portfolio and help promote E+Co’s goal of providing investment capital and support services to small, clean energy business ventures in developing countries.

E+Co is a 15-year-old nonprofit investment company started as a result of a Rockefeller Foundation study on opportunities for developing clean energy businesses in developing nations. It provides business support services and capital to clean energy businesses in Africa, Asia, Europe and Latin America and the United States.

E+Co also assists clean energy businesses with the aggregation, validation, verification and creation of high quality GHG offsets, including those that will be sold to Goldman Sachs. The carbon financing provides the enterprises with additional capital that supports, sustains and helps clean energy ventures grow.

Goldman has made a big bet on the growth of the U.S. carbon offset market and on the continuing pressure to do something about climate change issues. Small-scale clean energy projects, while supporting important social and environmental benefits, can struggle to attract sufficient capital to assure success. The financial backing and business development services provided by E+Co assists small businesses in those developing nations to supply clean and affordable energy to those regions, efforts that simultaneously increase employment opportunities and reduce greenhouse gas (GHG) emissions.

Goldman’s move is just another subtle reminder that smart companies are preparing now for the advent of a U.S. carbon trading market. Even though companies must exercise prudence in order to survive this market correction, executives must be mindful that failure to address both current and future market shifts will put your organization at a competitive disadvantage.

We anticipate the mounting wave of clean energy activity will generate greater pressure for companies of all sizes to measure and monitor their GHG emissions and acquire those carbon credits Goldman Sachs will help E+Co create.

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1 comment November 12th, 2008

Market Acceptance of Sustainable Energy Growing

We are approaching a time when sustainable energy will not require tax credits and government subsidies. New money is flooding into alternative energy investments from the private markets all over the world. It’s as if everyone has finally figured it out that we can’t continue to depend on the same energy sources.

Global investment in sustainable energy rose by 60 percent in 2007. Much of the investment went to financing assets — building plants to generate alternative energy. Wind power, especially, attracted investment this year.

Of course it didn’t help that the credit markets tightened in 2008 and the stock markets didn’t receive IPOs well. That drove many companies to mergers and acquisitions.

On the whole, alternative energy investments have not only continued to grow, they have broadened and diversified, taking in innovative financing structures for distributed renewable generation and demand-side management. Ordinary people (outside Europe, Canada and California, where sustainable energy gained acceptance long ago) are adopting alternative energy, creating more demand for innovative sources and more tolerance for changes in lifestyle.

Another sign of the market’s acceptance of the sustainable energy is greater activity in next-generation technologies, such as cellulose ethanol, thin-film solar technologies and energy efficiency. Wind continues to dominate sustainable energy investment, but the portfolio of available technologies has both widened and deepened (as existing technologies are refined and new ones come online). This is partly in response to changing supply/demand patterns (e.g. silicon shortages, or competition between food and fuel from food-based ethanol feedstocks), but also reflects improved efficiencies and decreasing costs as renewable technologies become more widely used.

According to the United Nations’ Environment Programme study on Sustainable Energy, the flow of dollars toward renewable energy will not stop. The trend has broadened to Asia, where China has taken the lead. This is a good sign — it’s something we can all support.

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Add comment August 18th, 2008

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