According to financial experts, carbon permits could quickly become the world's largest commodities market, growing to as much as $3 trillion by 2020 from just over $100 billion today. With thousands of firms and energy producers buying and selling permits to emit carbon, transaction fees for exchanges and clearing alone could top nearly half a billion dollars.The Center already has a trading house, the Carbon Mercantile Exchange (CMX), to participate in the carbon dioxide commodities trading market. The Center is prepared to work with Wall Street to help in creating the emerging products so they can provide the capital that would allow them to make green energy investments.
An infrastructure is already beginning to form, as entities like the New York Stock Exchange, J.P. Morgan Chase, Goldman Sachs, and the new Green Exchange are developing carbon trading platforms or expanding their environmental trading desks. There are nearly 100 funds already focused on green investments.
Carbon is a commodity derivative, and the new carbon market must conform to the broader commodity derivatives oversight. Uniform regulation will allow the Commodity Futures Trading Commission to apply and enforce the capital reserves, position limits, and transparency in a way that ensures a safe and well functioning marketplace.
The wide range of possible carbon reductions—from agricultural offsets, to efficiency technology, to wind power—will require innovative specialized contracts that can meet firms' needs. For example, in order to finance a new clean power facility, a company will need to lock in a fixed cost of carbon over a long period of time.The market for carbon-emissions permits should be internationally integrated. (WSJ, 10/21/09--derived from an article by New York Democratic Senator Kirsten E. Gillibrand) [Click on penguin for more]
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