Carbon Market Trading Will Accelerate

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.

When the United States administration declared that it would reduce carbon emissions by a significant percentage over current levels, many hoped that this would place additional emphasis on the potential passage of legislation in Congress. Such legislation would be necessary to force the business operations to comply and to make such reductions become a reality. The House of Representatives has already passed an Act that would spur such a development, but this is delayed in the Senate.

The American Clean Energy and Security Act includes a "cap and trade" scheme which will represent a mandatory market mechanism, similar in many ways to one that is already underway in the United Kingdom and the European Union's Emissions Trading Scheme. These developments would certainly trigger demand for voluntary emission reductions and carbon market trading as US entities seek to buy credits from an international origin.

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 not really a significant part of the overall trend worldwide, as they pale when compared to certified reductions that are mandated by various schemes in existence. Voluntarily, the United States has the Chicago Climate Exchange which runs a "cap and trade" scheme. Participants in this scheme, even though taking part on a voluntary basis, must commit to following through with their actions.

US business leaders imagine that if they take proactive steps to engage, that they will be ahead of the game as and when mandatory carbon reporting comes into place. Their carbon market trading activities prompt them to purchase the voluntary emission reduction credits, which they can "bank."

If mandatory carbon market trading is passed, it is likely to formulate a real cost for carbon as a traded commodity in the US. In addition to the sheer cost of purchasing energy, companies will have to account for the cost of emitting carbon as a consequence and this would place a very real additional cost to the bottom line.

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.

by: Daniel Stouffer.

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