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Morgan Stanley invests $3 bln in emission credits

Morgan Stanley, the biggest US securities firm, proposed to invest within five years in about $3 billion of emissions credits and projects to curb greenhouse gas output, taking advantage of surging trading volumes.

Investments will include credits from the Clean Development Mechanism of the 1997 Kyoto Protocol, Morgan Stanley said yesterday in an e-mailed statement. That mechanism encourages rich nations to spend on projects like wind farms and chemical-gas-combustion plants in poor countries. Credits can be traded for profit. „We strongly support the use of market-based solutions to meet environmental policies and objectives,” said Simon Greenshields, the bank's global head of power, associated power fuels and emissions trading and structuring. Industrialized nations may spend as much as $100 billion a year in developing nations by 2050, helping ensure fast-growing economies switch to low-fossil-fuel economies, the United Nations said last month. A UN board administers the CDM. Fortis, Belgium's biggest financial services group, and Deutsche Bank AG of Germany also trade credits. That spending by industrialized nations may occur if industrialized countries agree to emission reductions of as much as 80% by mid-century, buying credits in poorer nations where those cuts aren't possible, the UN said. Most of Morgan Stanley's investment „will focus on increasing our emissions trading volumes,” the bank said today in a second e-mailed statement. „The remainder will be used to invest in projects and for capital costs.”

In the first nine months of 2006, global emissions trading was about $21.5 billion (€17 billion), almost double the $11 billion in the whole of last year, the World Bank said yesterday in a report published at Carbon Expo Asia in Beijing. The price of certified emission reductions, a type of greenhouse-gas credit created under the protocol, has surged 48% so far this year, according to the World Bank report. Prices for CER credits under the protocol's Clean Development Mechanism bought directly from project owners rose to an average $10.50 a metric ton of carbon dioxide equivalent through September 30 of this year, from $7.10 a ton last year, the World Bank said in the report. In the EU since last year, about 12,000 factories and power stations need a government-granted permit for each metric ton of carbon dioxide they produce. They can sell surplus permits if they cut their output, providing a financial incentive. If their emissions rise above the level of their grant, they need to buy extra permits, known as allowances, via several over-the-counter brokers or commodities exchanges. EU allowances for December 2006 rose 5 cents to €12.10 ($15) a metric ton yesterday, according to the European Climate Exchange in Amsterdam. (Bloomberg)