The Wall Street Journal-20080118-Politics -amp- Economics- Hot Carbon Market Signals New Interest
Return to: The_Wall_Street_Journal-20080118
Politics & Economics: Hot Carbon Market Signals New Interest
Trading of carbon-emission permits almost doubled in value last year to 40.3 billion euros ($59.1 billion), according to a new report, signaling rising interest in a market formed under the Kyoto Protocol to fight climate change.
The market saw permits representing 2.7 billion metric tons traded last year, according to Point Carbon, a market-research firm based in Oslo.
In 2006, permits representing 1.63 billion tons changed hands for a total value of 22.45 billion euros, the firm said. Point Carbon provides information and consulting services to energy companies, investment banks and others.
The figures show rising interest among everybody from Wall Street banks to Chinese wind-power companies in a market meant to help companies reduce emissions of carbon dioxide, the main global-warming gas. A carbon permit lets a company emit one metric ton of carbon dioxide into the air. Companies that can reduce their carbon emissions can earn credits they can sell or trade.
The figures come as the U.S., which didn't sign the Kyoto accord and is the world's biggest carbon emitter, considers its own approach to emissions. Critics, including some U.S. policy makers, say a system based on taxing polluters would be more effective because it would be less susceptible to lobbying from industries seeking to maximize credits.
As the nascent carbon market grows, it is too early to tell whether it will help solve climate change. The European carbon market is only a few years old. Many big emitters, such as China, India and the U.S., aren't bound by its rules.
Almost all of the major investment banks have set up carbon trading desks, as many of the largest polluters in Europe have started to trade carbon emissions.
"What we're seeing is global movement of capital with the goal of cutting greenhouse-gas emissions," said Kristian Tangen, director of analysis at Point Carbon. "This is what the Kyoto Protocol was created to do."
There is also a small, voluntary carbon market based mostly in the U.S. that isn't regulated by Kyoto. U.S. officials have raised concern that these permits can't be adequately verified.
Europe remains the center of the carbon-market boom. The EU's Emissions Trading Scheme accounted for 62% of the volume and 70% of the value in carbon-emissions permits last year.
Under the system, big polluters in Europe are required to reduce emissions. If they do so beyond a set point, they can sell the excess in the form of carbon permits. If they can't reduce their emissions, they must buy permits from others.
New types of carbon permits are coming into vogue. One, called certified emission reductions, is generated through carbon-reduction projects, such as putting up windmills in China.
