My opinion is that reducing GHG could take several points off the gross national product of most industrialized countries before a twitch in the global mean temperatures is even noticed.  I'm talking trillions of dollars equivalent.  I am impressed by claims that some companies can go into co-gen and save CO2 as well as money ... but while you were so busy doing wonderful things, a new coal fired powerplant will come online every month or every week, worldwide.  

Seriously, this is the most significant challenge that mankind has ever faced, and it sounds like it can all be done with a slight of hand and using non-traditional accounting.  Perhaps I need it explained better, but my gut feeling is that facing the challenge will require enormous amounts of what is called cold, hard cash.

As the sea levels continue to rise and power consumption continues to increase, I think even our brothers and sisters in Europe - the leaders in Global Warming technology - may even face huge fiscal impacts as well.  Just like a Monty Python movie, we're seeing the "run away!" logic as buildings and homes fall into the sea.

Should I mention that many of the worldwide refineries, power plants, and nukes were built next to the ocean?

Gosh, if you're not talking cash you must be talking some Wall Street hedge fund indexed to CO2 or something, and perhaps it IS a good idea to make the top 2% of the world's wage earners to pay for it all!  How wonderful.  I like that perfectly fine...

Onward through the fog

The main problem with monetizing carbon offsets is that we do not know what the "inflation rate" of carbon.

We also don't know where the "tipping point" of carbon emmisions is.

Without those two orientating figures, it's impossible to monetize carbon offsets correctly.

Since otherwise we'll just end up with anemic undervalued offsets, which ammount to merely bandaids for the problem, rather than real solutions.

Then again, I guess what could be said is what we need isn't so much magic solutions.

But instead better financing for mundane solutions.

For instance 20 year fixed-rate low interest loans for retrofitting power plants with effeciency and cogen.

Since while they may be money making, it really begs the question is if they are maximizing oppourtunity costs.

Since a lot of these things are "put up a lot of money now, get back more over the long run", the only way to shift things is PAY for that risk, and make it a sure thing.

Once it becomes a sure thing, then business decision makers have a nobrainer.

you understand that "cost" to economist is opportunity cost not just the amount of cash spent?

--you understand that "cost" to economist is opportunity cost not just the amount of cash spent?--

Well, it's oppourtunity cost.
It's also risks. (i.e. How certain is the return-on-investment)

Companies may be able to buy capital intensive projects, but paying for it all upfront is asking for a lot.

If they could pay for it as a loan over a 10 year period, that would definantly soften the blow.

Because as nice as it seems, the idea that reducing we can reduce carbon without any costs is either naive or blatantly misleading.

That's not to say that there isn't business opportunity in beating climate change.  In fact, facing this challenge can be a net benefit both economically and environmentally.  If that's what he was trying to say, then I agree, but I think saying that we can do it without any costs is a poor use of words.  That is simply not true.

Still, I'm all for reframing the way we approach carbon reduction -- it's an opportunity rather than a requirement.

I want to hear more about this.

You wrote:

"Once it becomes a sure thing, then business decision makers have a nobrainer."

This is not precisely right, but it points out the full-employment assumption problem.  The fact that something makes money is not solely sufficient to justify capital allocation.  Suppose I told you that I had a sure fire stock tip, guaranteed to earn you a 30% return, provided you gave me a million bucks.  Would you do it?

Go through the thought exercise. My credibility obviously comes into question.  Shortly thereafter presumably comes your ability to line up a million bucks.  And then even if you buy all those, you're going to have some question as to whether the 30% is really "guaranteed".  Even if you trust me, surely there are other market uncertainties.  

Economic theory, however assumes that you will make that investment, because it's a no-brainer.  Reframe the question as a business realizing they could invest a million bucks to earn a 30% return on energy efficiency, and the exact same problems arise.  Do they trust the guy who says they can make the investment?  Suppose, in our thought experiment that the company is a paper mill.  They know paper, but they don't know about this new technology.  And they'd prefer to see their employees spend their time making paper rather than investing in energy projects.  Then there comes the question as to whether they have the million bucks handy.  And whether or not they really think that the 30% is legit.  This all gets simplified in corporate decision making processes into rules that look something like "don't deploy capital in non-core activities unless you can earn a simple payback of 2 years or less, and then only if we don't have other competing uses of our limited capital."   Words are different, but the rationale is no different from our stock broker example.  

But now look what happens when you start pricing carbon into the mix.  More revenues for energy conservation = faster payback and suddenly businesses are putting money in capital projects with phenomenally high rates of return.  Thus, the paper mill that was previously putting capital in 15% rate of return paper machine upgrades at the expense of 30% rate-of-return energy efficiency projects now sees an apparent increase the efficiency project (let's say to 50%, for the sake of argument) by virtue of the carbon credits.  But the net result is that their capital is now paying 30% dividends rather than 15.  And presto, we're getting greater economic growth by virtue of putting a price on carbon.  

But again, note the key distinction.  We have not made it a "sure thing", since many of these investments were sure things before. We have simply capitalized on an existing inefficiency in the marketplace, leading to economic growth AND carbon reduction.

Re: your cost question, you are right, so allow me to be a bit more precise.  When I said "cost", I was really referring to a macro economic sense of costs, in the way that it is typically characterized by those who portray carbon reduction as competitive with economic growth, and therefore tantamount to a reduction in overall standard of living.  To be quite precise, this is a fuzzy definition of cost. A slowdown in GDP growth is a cost by this math, but so is a mom who decides to stay at home and lay off her nanny because she gets more satisfaction out of being with her kids (since the money no longer paid to the nanny is less money in GDP).  The mom may reasonably question whether she has sacrificed her standard of living, but such is the nature of economics.  

But the larger point that I'm making is really one of opportunity costs.  I will readily spend capital costs if they lead to revenues and/or reduced expenses that earn a return on that capital.  The opportunity cost of that capital deployment is that once spent on a given investment, I can't spend it on another.   Per my prior response to GreyFlcn, there are lots of really high return investment opportunities in energy efficiency, many of which deliver much higher returns than the places that businesses are presently investing their money.  And if I can put money to work at 30% instead of 15%, I'd hardly call it a cost.  (Indeed, by giving me more free cash flow, it gives me more money for profits, ultimately leading to reinvestment or distribution to shareholders... driving up GDP growth.)  

Ergo, carbon reduction + economic growth.  Massive opportunities for carbon reduction and economic savings, and even if these investments don't get us all the way to a zero-carbon world, they are the cheapest source of carbon reductions out there.  Since all wallets are finite, they will be the first investments to be made in a world that prices carbon reduction, and therefore we can safely expect to see significant economic growth as a direct result of carbon-reduction policies.  If we don't, it will only be because the policies weren't crafted properly to incent efficient capital allocation.

Re your second comment that "the idea that reducing we can reduce carbon without any costs is either naive or blatantly misleading", I beg to differ.

Hopefully my prior responses have clarified, but I believe you have confused short-run capital costs with long-term net economic costs.  We can broadly generalize that just about all long term benefits require capital investment.  The fact that you have to spend money to make money does not mean that the spending is bad though.  I personally like to make my own beer, and - not too toot my own horn too loudly - think my homebrew is better than anything I can buy in a store.  Whether or not you agree, I can assure you that I have a higher standard of living since I decided to spend $100 on a homebrew kit.  Surely you wouldn't say that the idea that I can increase my own beer consumption without any net economic cost is naive or misleading, no?  Yeah, I've got capital cost, but the net result is I pay less for beer and drink a better product.

OK, so now let's expand to more significant subjects.  Our company put a turbine-generator in place at a tomato canning plant in California.  The canning plant makes high pressure steam for one process, then steps down the steam pressure for another process through a valve.  This valve effectively throws away the energy they put into the pressurization.  We installed three steam turbine-generators in the place of those pressure reduction valves to capture the energy they were throwing away.   Whole project cost them  just under a million bucks, and they now save $800,000 per year in avoided electricity purchases, all from energy that they were effectively throwing away before.   The generators also kept their plant operating during the California power crisis in 2001, meaning that - like my beer - they now have a product (in this case, electricity) that is both cheaper and better than the swill they used to buy.  And they're earning a phenomenal return on their investment.  AND - every kilowatthour they recover is a kilowatt-hour of carbon-soaked power that the grid no longer has to provide, thereby driving down the overall carbon release from the California power grid.

The specific case is generalizable, as it is typical of the many opportunities that exist throughout manufacturers, hospitals, universities, etc.  And yeah, there is a capital cost, but that's the price of economic progress.  It just so happens that you can get carbon reduction along with that progress.