Carbon Trading Marches On

                                             

                                             Source: www.celsias.com                                          

An Emerging Market is Well on its Way to Becoming the Next Big Thing

Signs of the growing market for carbon are popping up at about the same rate that bulbs are coming out of the ground in Vancouver gardens these late February days. 

Yesterday's Globe & Mail included an article on the development of agricultural carbon offsets (or sinks) to meet the demand for offset credits now that Alberta has begun to regulate carbon emissions (see A New Way to Make Hay, by David Ebner, February 26th).

Mr. Ebner does a good job of outlining the issues facing the emerging North American carbon markets.

"For Canada's dirtiest companies, the race to collect offset credits is just beginning, spurred by the reality that green legislation is soon going to emerge everywhere. New laws, in Ottawa and the United States, will likely pack tougher penalties than Alberta has come out with so far.

Just last week, British Columbia introduced a carbon tax and a plan to cap emissions. In Ottawa today, the federal budget is likely to include support for technology that reduces greenhouse gas emissions.

This is new ground for many. Government and industry officials across North America are watching Alberta closely as a kind of experiment in action. It's estimated that the market for carbon trading in North America could exceed a staggering $1-trillion (U.S.) by 2020, according to New Carbon Finance, a British consultancy that provides carbon price forecasting for European and global markets."

At the end of the article he also provides the statistics that demonstrate the market's growth the world over.

Yesterday also saw the Financial Times highlight LCH.Clearnet's intention to launch over-the-counter clearing services for Certified Emission Reductions and EU Emissions Trading System Allowances (see Clearnet Supports Carbon Trading Contracts, Stanley Pignal and Fiona Harvey).

The article notes that there are currently 110 million of CER's certified and a further four billion tonnes in development.  The practical effect of Clearnet's decision is likely to be a more mature market for CER's, reducing pritonnesce volatility and perhaps some of the price differential with EU-ETS Allowances.

Also yesterday, the Wall Street Journal's Environmental Capital blog (formerly the Energy Roundup) did a quick review of the growing carbon markets (see Market Making: Carbon Keeps Growing, by Keith Johnson).  WSJ chose to highlight Point Carbon's estimate that global trades in carbon dioxide emission rights will be worth about $92 billion in 2008 and the imminent launch of the Regional Greenhouse Gas Initiative by 10 northeast U.S. states.

Mr. Johnson closed by noting that "at least one group should be an enthusiastic supporter of the various cap-and-trade schemes under consideration in [the U.S.] Congress: Wall Street banks."

Last week the Environmental Capital Blog also announced the formation of a new carbon market, the World Green Exchange (see Trading Places: A New Carbon Market, by Keith Johnson).  The World Green Exchange is an offshoot of an existing electricity and gas trading platform operated by World Energy.  Notably, World Energy has been supporting trading in renewable-energy certificates since 2003. 

And finally, Australia's Greenair Fund announced earlier this week that they will be seeking up to Aus$100 million  in an IPO later this year.  Greenair is a Sydney based developer of forest-based carbon offsets.  With all of the excitement around carbon these days, they should have little problem getting the money.