Emissions Trading — Towards a Global Carbon Market

The global market in physical carbon trading tripled in 2006, to US$30 billion, with London's Inter-capital brokers reporting their broking activity at two million MT of carbon derivative contracts a day. The bulk of carbon trading, some US$25 billion, was carried out through the sale of allowances under the European Union's Emissions Trading Scheme (EU ETS), which covers industries pumping out large amounts of carbon dioxide. In 2006 and 2007 the carbon market witnessed unprecedented growth in this asset class, not only from industrial companies but also from newer participants. During the G8 summit of industrialized nations in June 2007, business leaders from the energy industry called for global carbon markets to help tackle climate change. On the other hand, energy-sector leaders are keen that there should be a single price for carbon emissions throughout the world. The idea of carbon trading is that firms can either cut emissions or buy the right to keep polluting. This chapter details how although there is no global carbon market but industry talks and politics seem to be pointing in this direction. It also presents the number of steps executed towards the creation of a global carbon market.