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Carbon traders and clean-tech companies heartened by speech

It was music to the ears of carbon traders and clean-energy company executives to hear President Obama urge Congress to pass energy and climate change legislation that places a cost on greenhouse gas emissions.

"To create more of these clean-energy jobs, we need more production, more efficiency, more incentives," Obama proclaimed in his first State of the Union address.

"And yes," he said, "it means passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America."

Obama thanked the House for passing a bill in June, sponsored by Reps. Henry Waxman (D-Calif.) and Edward Markey (D-Mass.). At its core, that bill would create an economywide cap-and-trade program that ratchets down industrial carbon dioxide emissions over time by distributing a declining number of pollution permits to electric utilities and factories. Support in the Senate for cap and trade is much more tenuous, because of concern about the economic impact and the creation of an international commodity market for carbon allowances and offset contracts.

"This year, I am eager to help advance the bipartisan effort in the Senate," Obama said.

Dirk Forrister, director of Natsource, a New York-based asset manager in carbon and renewable energy markets, said extending an olive branch to Republicans is critical to getting that bill passed out of the Senate, and Obama did just that.

'A deal to be had on climate'

"He acknowledged the differences with the Republicans and said he'd work with them," Forrister said after the speech. "So I took that as a real encouraging speech for climate and clean energy. There's a deal to be had on climate if they can get past the partisanship."

Forrister, former chairman of the White House Climate Change Task Force under President Clinton, and Henry Derwent, CEO of the Geneva-based International Emissions Trading Association (IETA), urged Obama to focus on passing a cap-and-trade scheme this year, rather than jettisoning the House approach for a less comprehensive energy bill. They called on Obama to "establish a clear timeline for passage of an economywide cap-and-trade bill."

IETA represents some of the world's largest investment banks and trading houses, most of which have carbon trading divisions poised to inject billions of dollars into a U.S. and European carbon emissions market.

The group asserts that a global financial trade in carbon credits, offset contracts and derivatives would fuel investment in clean-energy projects aimed at slashing global emissions. But it has long said it won't happen unless Congress creates a U.S. market to buttress any global agreement on emissions reductions and financing programs for developing countries.

Obama placed energy and climate in the context of jobs, perhaps not suprisingly, given rising political pressure to turn his attention to bread-and-butter economic issues.

"I took it as a sign of real seriousness," Forrister said.

Pitching a race to jobs and green technology

Obama emphasized an emerging race among the United States, China and Europe to capitalize on new clean-energy and battery technology to replace coal and oil, which dominate the world's energy use.

"There is a race in the global theater," Forrister said. "Folks in America don't really like a defeatist attitude. They want a winning attitude."

Ken Newcombe, CEO of C-Quest Capital, based in Washington, said the mere mention of "green jobs" should be a positive sign to the carbon trading and energy finance community.

"If he mentions green jobs, that's talking big that he'll continue on the climate security bill," he said.

Before the speech, Newcombe warned that mentioning climate directly could complicate the political environment, but he said many investors are already convinced Obama is serious about the issue.

"The president turned up in Copenhagen and was singlehandedly responsible for getting accord out and breaking the deadlock," he said. "That was a remarkable sign of his commitment."

For his part, Obama also mentioned some items popular with the GOP: zero-emissions nuclear power plants, oil and gas drilling, biofuels and clean-coal technology.