Carbon Market Trading Revives

Carbon Market Trading Revives

Posted by Daniel Stouffer on April 8th, 2010

Carbon market trading is likely to see an important revival due to the recent statements made by Pres. Obama in the United States. The statement, that the country would reduce its greenhouse gas emissions by 28% over the next 10 years, is likely to see a boost in voluntary commitments to the carbon market and will in some respects make up for the disappointments suffered by environmentalists following the poor showing at the Copenhagen Summit.

The declaration made by the United States administration is surely relying on the passage of controversial legislation by Congress, when it refers to its carbon emissions reduction targets as compared to current levels. Without such legislation, how would business be forced to comply to such an extent that these figures could be realized? The House of Representatives passed an act in 2009 that could produce mandatory action, but this is languishing in the Senate.

The House passed the American Clean Energy and Security Act to set up a “cap and trade” scheme within a mandatory market mechanism. The European Union already has the Emissions Trading Scheme and the United Kingdom has the Carbon Reduction Commitment. With so much activity in government circles, demand for voluntary emission reductions and carbon market trading is certainly engaged as US companies look to buy credits overseas to kickstart their options.

Carbon market trading is likely to see a boost through 2010 as US businesses seek to purchase credits internationally, as they seek voluntary emission reductions. There’s already evidence that this is taking place, with growing demand for unit deals in countries like India, for example.

Voluntary emission reductions are only a relatively small part of the existing trade for emissions certificates, as the mandatory schemes, such as those significantly in place in Europe work through. So far in the United States, the only “cap and trade” scheme is a voluntary program run by the Chicago Climate Exchange. Even though this is voluntary, participants must commit to following through with their proposals.

We are seeing an acceleration in carbon market trading in the United States, as business leaders imagine that mandatory carbon reporting could soon follow. By engaging in voluntary emission reduction credit purchase now, they are adding to their bank for future use.

It’s reasonable to assume that carbon will become a traded commodity in the United States and when mandatory carbon market trading has passed this will add to the cost of doing business significantly. Not only will an organization be required to purchase its energy, but it will also have to allocate costs to handle the carbon emissions that it produces.

With healthcare out of the way, it is likely that Pres. Obama will next turn his attentions to energy and we can expect to see the Senate take up potential passage of the ACES Act as 2010 unfolds.

Daniel Stouffer has much more data about carbon market trading and how a visit to www.verisae.com can aid you.