Carbon Trading Set to Triple by 2012

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Following the recent approval by the US House of Representatives of a climate change bill, the world now appears set on an irreversible path toward a dramatic expansion of carbon trading. Oxford Analytica takes a look at carbon emissions legislation around the world in a new report.

OxAn expects carbon markets to triple in size by around 2012: “The establishment of new national emissions trading schemes in countries including the United States, Australia and New Zealand combined with continuation of the European Emissions Trading Scheme (EU ETS) will be the main drivers of this growth. Japan and Canada, though more cautious, are also in a position to move quickly towards a regulated ETS.

The appeal of emissions trading lies in the way it simultaneously supports innovation and entrepreneurship with the desire of regulators to set tight standards.

Unlike taxation, it has clear goals, which can be easily communicated by politicians to the public and provides useful signals in international cooperation. While the economic crisis has added weight to industry concerns of the impact of increased climate regulation, existing carbon markets continue to expand in scope and new national markets will be implemented in the United States, Australia and New Zealand in the next few years.

Irrespective of the nature of the agreement reached at Copenhagen in December, carbon markets will continue to expand due to new national schemes. Implementation of such schemes in Australia, Canada and New Zealand will follow developments in the United States. The degree to which legislators look prepared to use trade sanctions against countries will shape carbon market development in Japan and other major emitters without plans for regulated markets.