What To Expect With The Carbon Market Trading Revival

Analysts expect to see a significant revival, in voluntary terms

, for carbon market trading, due in large part to the recent declarations by Pres. Obama that the United States will aspire to bring down carbon emissions by a significant percentage over the next decade. The announcement was hailed by environmentalists, who had been disappointed by the seeming lack of action at the Copenhagen Summit.

The US administration's declaration of its aim to reduce its GHG emissions over the 2008 levels has ignited hope to many that laws will be passed in no time that will enforce mandatory compliance among large operations among enterprises in the entire country. This concept moved forward from theory to a bill through the initiatives of the House of Representatives last year, though the Senate caused delay to the passage of the said bill.

Analysts expect to see a significant revival, in voluntary terms, for carbon market trading, due in large part to the recent declarations by Pres. Obama that the United States will aspire to bring down carbon emissions by a significant percentage over the next decade. The announcement was hailed by environmentalists, who had been disappointed by the seeming lack of action at the Copenhagen Summit.

Once the United States Senate would pass its equivalent to the American Clean Energy and Security Act, there will be a 'cap and trade' scheme that will be setup as a mandatory mechanism,which would be similar to the EU's Emissions Trading scheme or the current initiative of the UK. This will no doubt trigger the demand for voluntary emission reductions whilst organizations act by buying credits from the international market.

As enterprises in the United States are seeking to buy credits internationally, they are also seeking for their voluntary. This is very much tangible with much evidence such as the increasing demand for unit deals in other countries such as India, for example.

Currently, voluntary emission reductions represent only a small part of worldwide emissions reductions, with certified reductions under the various existing schemes far in excess. In the United States, the Chicago Climate Exchange is set up to operate a "cap and trade" scheme on a voluntary basis, although participants must commit to following through once they join.

There night be proactive strategies and steps that will be taken by the leaders of enterprises in the United States to make them take the lead in the game as the mandatory carbon reporting takes 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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