Well, it may sound something like this. It’s edifying, though remarkable sustained growth in the emerging economies coupled with liquidity support from the OECD countries has removed domestic barriers of trade and businesses. Globalization has, in fact brought our world ever closer with both human and capital resources crossing barriers like never before. It has also brought around increased competitiveness among the emerging economies with each mastering in its own track. With an average World GDP growth rate of around 4.5% and of countries like China (11.9%) ,last quarter and India (9.3%), developing in their fastest pace ever since their economic liberalizations, with other emerging nations already having been joined this economic growth bandwagon.

Abundance of liquidity is lush in the capital markets, fuelling asset price bubbles in one way, and helping mobilize untapped resources in every nook and corner of this world the other way. The emerging markets like Vietnam, BRICS, Thailand, Indonesia, Malaysia, Ukraine, Eastern Europe and Africa, all have been the breeding ground for emerging business opportunities, with PE(Private Equity), Venture Capital funds and other investors migrating like microbes to seek wealth. It’s not about host and parasite relationship, but it’s about true collateral, mutual and cultural benefits that businesses are emigrating from their source of origin to these new found lands—the once ignored economies have turned out to be the land of opportunities. Truly, some economies have already become the investor’s paradise and a global manufacturing powerhouse. Opportunistic business ventures with broad vision have emulated the markets.

This has been possible due to ‘Trading Resources’, from across the world, with once liquidity crunched countries like China and India seeking immobilized minerals in African nations, where they have been investing vigorously with their newfound liquidity (money). Well, back in the 80’s when China and India had only minor share of global GDP, that’s around 3% each, it has rocketed to 15.3% (China) and 6.3% (India). The projected share of China and India is likely to grow by 2030, according to some analysts’ when they will constitute nearly 22% of the world GDP. China will probably rein the SE Asian economy as the largest manufacturing hub in the region.

Global Equity Markets

The total value of emerging market equity in 1986 was around $ 238 billion, among 33 countries compared to $ 1.8 trillion in 1995, as per IFC and is likely to touch $ 22 trillion dollar by 2010. The global equity market capitalization, according to recent published data in June2007, is being lead by North America and Europe, with a combined share of 76% of the total share, the US having a substantial share of 44% and the BRICS comprising only 4-6%. This may change dramatically once the policy makers of the emerging economies open their windows to the winds of the foreign equity players for investing substantially in these emerging equity markets. Though there has been much concern in emerging economies where increased domestic liquidity fuelling inflation and asset price bubble, the notion that too much money chasing too few goods are likely to change once these countries ride the consumer evolution boom.

Investors have seen stellar gains from equity investments in the emerging ,markets (EMs), and the reason that more and more private equity players are turning toward soft growth scenario in Latin America, Eastern Europe and the Asia-Pacific region that have been experiencing equity bubbles in recent times. China has been one such example, where each day, about 3, 00,000 people have been opening trading accounts for stock trading, that’s about 36% comapared to India’s 4.5%. This has created a bubble that has been much concern for the policy makers as enormous liquidity is chasing the stock markets. The other instances being India and Brazil, which have seen substantial FII foraying into the equity market investments.

The comparative analysis of the segmented equity market returns of China, India, Brazil, Ukraine, Hong Kong, Russia and other countries has revealed remarkable similarities among themselves. All these economies are racing past each other; all are having stock market bubbles with promising economic growth and rapid business development environment. From beneath this entire story, the US sub prime problem stepped up wiping out substantial wealth values from the global equity markets. The recent turmoil changed the dynamics of the market return trends as a three year has experienced some jitters.

Sub Prime Effect

The effect of the sub prime crisis has been quite far reaching and dramatic. The resulting credit squeeze and debt markets crisis has towed down the market sentiments across the platform leaving some investors losing some of their wealth invested in the equities, due to correlated stock market down turn. Asia-wide, markets tumbled and hedge funds reported losses from their mortgage-backed bonds (MBS) bond exposures that are trading in various markets. The risk appetites of the investors have come down as more of them have turned towards government securities and bonds as safer havens. Bonds prices are seen to be rising with tight liquidity condition and market volatility remaining high.

Central banks across the world are trying to cushion the market jitters by providing liquidity in this hour of crisis, while the US Fed has cut its bank rate in late august. There has been an overall fear of an US and global economic slowdown as investors is wary about their burses. Nevertheless, with the economic fundamentals strong in the emerging markets, much of this shock would be absorbed by the growth appetite of bigger emerging markets like China and India. It’s to be seen how the corporate sectors reacts to this crisis, as some mega deals by private equities are in the stake. The debt market outlook is not satisfactory, as investors are cautious about debt market portfolios, particularly the Asset Backed Securities (ABS) markets and the Leveraged Buyouts (LBO) deals.

The recent turmoil in the sub prime markets has brought in many queries, after which the Fed and the Bush administration has taken over the tasks of mortgage reform policy to safe-guard the borrowers from their woes. Financial markets can never be immune to undesired events, and one needs better information transparency to foresee any such events in the near future.

Global capital flow analysis toward the emerging markets shows a perennial Increasing trend in the last couple of decades. The data shows the total port-folio of equity capital as well as FII inflow to major emerging nations. Of the major economies, Europe seems to have taken the lead in attracting the largest share of capital, followed by U.K. and the emerging markets.

Emerging Asia — China

In purview of China’s emergence as a manufacturing hub in Asia, her export has increased many folds in recent years. Recently published data from Bloomberg indicates that China’s imports of intermediate goods from Asian region have marginally dropped as China is self supplying her intermediate goods due to import substitution. This could mean unfavorable reactions from Asian suppliers of these intermediate goods as countries like Thailand, Malaysia, Singapore, and Indonesia depend heavily on Chinese imports of their raw processed goods. The components for electronic industry has seen a huge demand both from domestic and international markets, as parts like servomotors, laser components, DVD heads, piezo-electric devices are the building blocks of CD/DVD players, MP3/MP4 players, etc. China has boosted its component business activity in the coastal Guangdong regions, like Shenzhen, and Guangzhou, the reason behind drop in China’s component import. According to industry analysts, there might be two reasons : Firstly, to develop its own component and intermediary industry, secondly, meet the growing domestic and international demand, thirdly, cheaper alternatives to its imports, and lastly, buffering the emerging markets currency appreciation against the Yuan/$.

Indian Frontier—Sustained Growth

What India may not be having some well planned central business districts with towering skyscrapers , but it does not seems to be stopping the business growth and enthusiasm in India. Well, India is on its way for categorized and well planned much needed infrastructure ventures and real estate investments, as did exactly what took place in China in the early eighties-1980. Truly, the need of this hour is better infrastructure, road and town planning and a few highly centralized business districts. And it is this promising growth opportunities that investors put money into and see those spiraling into profitable returns.

The market susceptibility to the US sub prime has turned the focus on the Indian subcontinent, with India playing a major role in growth economics and corporate fundamentals. India, with its second largest consumer market in Asia (ex-Japan), boasts the breeding ground for SME and entrepreneurship activities. The pace of economic growth has been quite outstanding, with above 9% real GDP growth and strong economic fundamentals driving the services and the manufacturing sectors. Recent FII dynamics (outflow and inflow) and a large domestic capital market fuelled by liquidity from domestic institution investments have seen increased liquidity poured into mutual funds and insurance companies, thus buffering somewhat from the international market volatility. Though it is difficult to decouple India’s economy from the US, there has been no such direct effect seen in response to the US Sub prime mortgage market collapse. FII s have pulled out around $2billion from the markets in July-August ’07, but thanks to the domestic ‘capex ‘growth and the shock absorbing effects by mutual funds and equity investments, India did actually decoupled itself somewhat from the global effects. It’s also the reason that caused record appreciation of rupee, which have seen to be trading at below rupee 40.00 levels (39.75) against the dollar due to sustained demand and increased appetite for Indian currency, and assets – a big pie to foreign investment funds and venture investors.

India, thus have recently been going through rapid investment phase in businesses, and real estate sector have seen real surge in activities, with the cities and towns in Indian horizons in verge of transforming themselves into dazzling skylines to reckon with in the coming years.

Trading Global Resources–Go where the markets are!

Though the bounty of nature is immense, but with an unending demand for materials, resources have become scarce, in comparison to mankind’s ever increasing demand. This demand is for food, energy, oil, precious minerals and everything that has economic value (commodities). Global finance is, in fact, trading resources, or commodities and these resources are scattered in different parts of the world, thus mobilizing them demands both capital and human migrations. The human capital, the best known capital resource that mobilizes the world, just as the muscles move the bones and tuned by the nerves moving those muscles, need energy to perform tasks. This energy for the financial world is ‘capital’, more so liquidity- or money that literally mobilizes the resources. The demand-supply imbalance has created some scanty resources priceless and some others soaring sky-high. Oil is one such, as demand for oil is here to grow since having limited capacity as reserves. This has caused crude oil price shock, as crude oil is trading above $80 /bbl (per barrel) which were trading at $ 74.15 in June 07. Rightly, it can be assumed that oil is moving this world, as much of the markets are being affected by rise in crude oil prices. These factors have also resulted in commodities price volatility. There has been considerable rise in global market risk factors along with the trade and investment boom , and risk management of investment portfolios have taken the prime seat of analysis amongst the investors’ classes.

It’s the concept behind the story that ‘grows where the market is, sought where the opportunity lies’. The emerging equity markets are the next hot bed for the geeky investors as they diversify their portfolios through global managed equity funds investing in stock markets over a wider platform, rather that the US alone.

Beyond Liquidity—Global Warming

The Bigger threats to global economy, the natural disasters, Tsunami and the melting icebergs!

Some things cannot be ignored and need sincere thoughts on the matter of global trade, business and our society. And that is global warming. With manifold increased CO2 emission rates polluting our mother planet, the audiences, policymakers, environmentalists, scientists and the general people to speak, all have turned to this ever threatening human created mayhem. Industrial frontrunners like the US and major developed economies have sounded alert on a big scale to tackle the problem of global warming. China has been blamed much to dismay about contributing significantly to the green house gases, but considering the rapid pace of industrial production creating byproducts as industrial wastes, which has been both polluting the air and water. The rising sea levels pose a major emoting threat to islanders and coastal areas of major economies. The Kyoto protocol drawn up did significant in cutting down carbon emissions by providing carbon credits to those countries emitting lower greenhouse gases. Things beyond the liquidity are as important to the financial markets as the world economy have become intrinsically complex, highly integrated and more regulated . Political uncertainties on the Mid-East gulf frontier and the Iran nuclear crisis as well as the Latin American bureaucracy have had considerable effects on the global financial markets. The North Korean nuclear program issue has been a lot of concern for the Asia-Pacific political stability as though the crisis seems too have weaned down somewhat now as due to the historic summit between the North and the South Korean counterparts after seven long years. Overall, the financial markets are in search of the so called; ‘Financial Stability’.

As one of the bigger financial downturns the markets experienced after the 1997 Asian financial crisis and the 1998 Russian debt crisis when the LTCM went bankrupt on bad currency arbitrage bettings,the current US sub prime mortgage market failure have affected the financial markets substantially. Though the market still does not have clear account of the defaults and exposure to the sub prime, according to some, around $650 billion or more of ARM loans to be reset next year, time will convey the routing of financial risks into the global markets. For the investors and the invested alike, they have to remain cautious yet active since the developed and the emerging markets have coupled themselves due to globalizing trade investments. And with all of these in the background, we have to accept and act accordingly to the unforeseen events looming across the horizon, both natural and man-made, something’s ‘beyond liquidity’.

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Scope

Key market data on the volume and market value of carbon allowances, covering both project-based transactions and allowance-based transactions from 2004–2009.
Analysis on all global carbon market exchanges — the EU Emission Trading System (ETS), New South Wales Exchange, Chicago Climate Exchange, the Regional Greenhouse Gas Initiative (RGGI), Australian Climate Exchange, World Green Exchange etc.
Historic pricing trends for carbon in various exchanges and project-based transactions from 2005–2009.
Forecasts of the global carbon trading market up to 2020 based on likely scenarios that might emerge in the future.
Impact assessment of key carbon regulations and policies and their impact on the growth of global carbon trading market.
Analyzes market-based instruments such as certifications and standards used in carbon trading in 2009.
Overview on investment firms, infrastructure and energy service providers, advisory companies, financial firms, brokerage firms, carbon solution providers and other auditing firms participating in carbon trade.
Key emission trading companies covered include 3 Degrees Incorporated, APX Incorporated, Baker & McKenzie, Blue Source, CantorCO2e, Climate Focus and Credit Suisse
Assessment of risk and opportunities for the corporate in the carbon constraint environment

Reasons to buy

Navigate the carbon emission market landscape through detailed analysis of the current carbon market dynamics and potential changes
Identify the most promising geography to invest in energy efficiency and renewable energy projects, in order to minimize carbon taxes.
Identify the most promising geography to invest in the unconventional and renewable energy sectors to minimize carbon taxes.
Develop custom strategies for different geographies based on the stringency of the carbon policy in the respective geography.
Develop business strategies with the help of specific insights into policy decisions being taken on the carbon credits trade by EU 27, the US, Australia and other developed and emerging countries worldwide.
Identify risks associated with tightening carbon emission cap and transform them into opportunities for future growth.

1 Table of Contents 6

1.1 List of Tables 8
1.2 List of Figures 9

2 Introduction 10

2.1 Greenhouse Gas (GHG) Emissions and Their Impact on Global Carbon Trading Markets 10 2.1.1 Impact of Greenhouse Gases on Ecology 10
2.1.2 Naturally Occurring Carbon Cycle 11
2.1.3 Global Initiatives to Reduce Carbon Footprint 12

3 Origins of Carbon Trading Market and Exchanges 14

3.1 Evolution of Carbon Trading Market 14
3.2 Global and Regional Carbon Exchanges 15

4 Kyoto Protocol, a Precursor of Emissions Trading Systems 17

4.1 Clean Development Mechanisms (CDM) 19 4.1.1 CDM Project Activity Cycle 20
4.1.2 Joint Implementation (JI) and Assigned Amount Unit (AAU) 20
4.1.3 Emission Trading 28

5 Global Carbon Trading Market: Dynamics and Statistics 29

5.1 Global Carbon Trading Market Overview 29
5.2 Global Allowance Markets 31 5.2.1 The EU Emission Trading Scheme: Still the Most Prominent Carbon Market 32
5.2.2 The US Market 33
5.2.3 The Australian Market 35

5.3 Global Project-based Market 36 5.3.1 Primary Project-based Market 37
5.3.2 Secondary Project-based Market 56

5.4 Post 2012 Market Uncertainty: Scenario Based Forecast to 2020 57 5.4.1 Linear Growth: Moderate Market with Current Programs and Policies 57
5.4.2 Scaling Up: Implementation of US Cap-and-Trade Program and EU Integrated Systems 59
5.4.3 Global Reach: Collaboration of EU, the US and Developing Nations 61

6 Global Carbon Credits Market Policy Framework Facilitating Emissions Trading 63

6.1 Overview of Regulatory Framework for Emission Trading Systems 63 6.1.1 American Clean Energy and Security Act and its Implications 63
6.1.2 European Union’s Climate Change Policy 64
6.1.3 Climate Change Initiatives in Canada and Prospects for Emissions Trading 67
6.1.4 Australia’s Climate Change Initiatives will Aid the Emission Trading Mechanism 67

6.2 Increasing Role of International Emissions Trading and International Emissions Trading Association (IETA) in Boosting the Market 68 6.2.1 Objectives of IETA 68
6.2.2 Programs by IETA 68

6.3 Various Regulatory Frameworks and Regional Initiatives in the US 69 6.3.1 American Clean Energy and Security Act of 2009 70
6.3.2 Regional Greenhouse Gas Initiative (RGGI) in the US 71
6.3.3 California Global Warming Solutions Act of 2006 AB 32 73
6.3.4 Western Climate Initiative (WCI) 73
6.3.5 Midwestern Regional GHG Reduction Accord (MGGRA) 74
6.3.6 EPA Climate Leaders 74
6.3.7 Hawaii Global Warming Solutions Act of 2007 74
6.4 European Union Emissions Trading System Promotes Emissions Trading Market 75
6.4.1 EU ETS 75
6.4.2 Revised EU ETS 75

6.5 Japan’s Keidanren Voluntary Action Plan and Other Voluntary Markets 77
6.6 Emission Reduction Schemes of Australia 78 6.6.1 New South Wales Greenhouse Gas Abatement Scheme 78
6.6.2 Greenhouse Challenge Plus 78
6.6.3 Carbon Pollution Reduction Scheme 78

6.7 Canadian Government’s Measures and Initiatives Drive Carbon Trading 79
6.8 Global Carbon Credits Standards 79 6.8.1 American Carbon Registry Standard 80
6.8.2 The Climate Action Reserve Protocols 81
6.8.3 The CarbonFix Standard 81
6.8.4 Chicago Climate Exchange Offsets Program 81
6.8.5 Climate, Community, and Biodiversity Standards 81
6.8.6 EPA Climate Leaders Offset Guidance 81
6.8.7 Greenhouse Gas Services Standard 81
6.8.8 The Gold Standard 82
6.8.9 Greenhouse Friendly 82
6.8.10 ISO 14064 Standards 82
6.8.11 Plan Vivo 82
6.8.12 Social Carbon Standard 82
6.8.13 TUV NORD Climate Change Standard and VER+ Standard 82
6.8.14 Voluntary Carbon Standard 83

7 Competitive Landscape of Emission Trading Companies 84

7.1 3 Degrees Incorporated 84
7.2 APX Incorporated 84
7.3 Baker & McKenzie 84
7.4 Blue Source 84
7.5 CantorCO2e 84
7.6 Climate Focus 85
7.7 Credit Suisse 85
7.8 EcoSecurities Group 85
7.9 Equator LLC 85
7.10 MGM International 85
7.11 Natsource 85
7.12 RNK Capital LLC 86
7.13 Sterling Planet, Incorporated 86
7.14 Tradition Financial Services/TFS Energy/TFS Green 86
7.15 TUV SUD America 86

8 Corporate Sustainability in a Changing Landscape 87

8.1 Carbon Exposure Risks 87
8.2 Carbon Exposure Opportunities 88
8.3 Carbon Emission Intensity by Sector 88
8.4 Companies are Expanding the Horizons of Sustainability Practices — New Initiatives in Carbon Sustainability 89 8.4.1 Chevron Corporation — Multifaceted Response to Climate Change 89
8.4.2 Walmart Stores, Inc. — Sustainability Mandate throughout the Supply Chain 91
8.4.3 General Electric Co. — Ecomagination Initiative, Revenue Opportunities from Climate Change Solutions 92

9 Appendix 94

9.1 About GBI Research 94
9.2 Abbreviations 94
9.3 Methodology 96 9.3.1 Coverage 97
9.3.2 Secondary Research 97
9.3.3 Primary Research 97
9.3.4 Expert Panel Validation 98

9.4 Contact Us 98
9.5 Disclaimer 98

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Scope

The report provides a detailed analysis on the global carbon policy initiatives driving the carbon trading markets. Its scope is as follows.
– Impact assessment of the carbon policies in the United States (US), the European Union (EU), Canada, Australia and Asia Pacific regions on the world carbon trading markets.
– Carbon trading value from 2010-2020, which help in identifying a market potential.
– Key carbon regulations and policies at regional level in the US and unified carbon regulatory framework in the EU and their impact on the growth of global carbon trading market.
– Analyzes the probable regional policy instruments in the US and Asia Pacific regions, which will drive the global carbon trading markets beyond 2012.
– Key carbon regulations and policies at regional level in the US and unified carbon regulatory framework in the EU and their impact on the growth of global carbon trading market.
– Analyzes the regional policy instruments in the US and Asia Pacific regions, which will drive the global carbon trading markets.
– Review of Clean Development Mechanism (CDM) projects in the Asia Pacific and Sub-Saharan regions in 2009
– Details on various Kyoto mechanisms and helps in identifying potential markets by navigating the policy landscape worldwide from 2005-2012.
– Key data and information on the volume and market value of carbon allowances, covering both project-based transactions and allowance-based transactions from 2004-09.
– Historic pricing trends for carbon in various exchanges and project-based transactions from 2004-09.
– Analyzes market-based instruments such as certifications and standards used in carbon trading in 2009.
– Overview on investment firms, infrastructure and energy service providers, advisory companies, financial firms, brokerage firms, carbon solution providers and other auditing firms participating in carbon trade.

Reasons to buy

- The report will enhance your decision making capabilities in a rapid and time sensitive manner.
– Develop business strategies with the help of specific insights into policy decisions being taken on the carbon credits trade by EU 27, the US, Australia and other developed and emerging countries worldwide.
– Identify opportunities and challenges in exploiting carbon emission reduction projects worldwide.
– Understand the market positioning of carbon credits in correlation with carbon policies.
– Increase future revenue and profitability with the help of insights on the opportunities and critical success factors of the EU ETS in the carbon trading market.
– Benchmark your investments against the major players in the carbon trading markets.
– Be ahead of the competition by keeping yourself abreast with all of the latest policy changes on carbon mitigation globally.
– Plan your investments to minimize the impact of carbon taxes due to changing carbon policies.
– Plan your project locations and project types in order to capitalize on the growing carbon allowance market.
– Identify the most suitable geography to invest in emission reduction projects.
– Target the most suitable geography for emission reduction projects based on the policies to gain incentives.
– Develop custom strategies for different geographies based on the stringency of the carbon policy in the respective area.
– Navigate the carbon policies through detailed analysis of existing carbon allowance market dynamics and potential changes.
– Identify the most promising geography to invest in energy efficiency and renewable energy projects, in order to minimize carbon taxes.

1 Table of contents 4
1.1 List of Tables 6
1.2 List of Figures 7

2 Introduction 8
2.1 Overview 8
2.2 GlobalData Report Guidance 9

3 Greenhouse Gas Emissions and its Impact on Global Carbon Policies 10
3.1 Impact of GHGs on Ecology 10
3.1.1 Introduction to Global Warming 10
3.1.2 Illustrations of Ecological Imbalance due to Excess Carbon 10
3.2 Global Initiatives to Reduce Carbon Footprint 11
3.2.1 The Kyoto Protocol and its Implementation Challenges 11
3.2.2 Development of Natural and Artificial Carbon Sequestration Techniques, Energy Efficiency Projects and Renewables 11
3.2.3 Evolution of Carbon Trading Market 12

4 Global Carbon Policy Frameworks Boosting Emissions Trading Markets 13
4.1 Overview of Regulatory Framework for Emission Trading Systems 13
4.1.1 American Clean Energy and Security Act and its Implications 13
4.1.2 European Union’s Climate Change Policy 14
4.1.3 Climate Change Initiatives in Canada and Prospects for Emissions Trading 18
4.1.4 Australia’s Climate Change Initiatives will Aid the Emission Trading Mechanism 18
4.2 United Nations Framework Convention on Climate Change 18
4.3 Kyoto Protocol, a Precursor of Emissions Trading Systems 18
4.3.1 Overview of Kyoto Protocol, Participating Nations 18
4.3.2 Clean Development Mechanisms (CDM) 21
4.3.3 Joint Implementation and Assigned Amount Units 40
4.3.4 Emission Trading 47
4.4 Increasing Role of International Emissions Trading and International Emissions Trading Association in Boosting the Market 48
4.4.1 Objectives of IETA 48
4.4.2 Program by IETA 48
4.5 Various Regulatory Frameworks and Regional Initiatives in the US 49
4.5.1 American Clean Energy and Security Act of 2009 50
4.5.2 Regional Greenhouse Gas Initiative in the US 52
4.5.3 California Global Warming Solutions Act of 2006 AB 32 53
4.5.4 Western Climate Initiative 54
4.5.5 Midwestern Regional GHG Reduction Accord (MGGRA) 55
4.5.6 EPA Climate Leaders 55
4.5.7 Hawaii Global Warming Solutions Act of 2007 55
4.6 European Union Emissions Trading System Promotes Emissions Trading Market 55
4.6.1 EU ETS 56
4.6.2 Revised EU ETS 56
4.7 Japan’s Keidanren Voluntary Action Plan and Other Voluntary Markets 57
4.8 Emission Reduction Schemes of Australia 59
4.8.1 New South Wales Greenhouse Gas Abatement Scheme 59
4.8.2 Greenhouse Challenge Plus 59
4.8.3 Carbon Pollution Reduction Scheme 59
4.9 Canadian Government’s Measures and Initiatives Drive Carbon Trading 60
4.10 Policies and Market Instruments Driving Carbon Trading Programs in Other Countries 61
4.10.1 Policy and Market Mechanisms in China 61
4.10.2 Policy and Market Mechanisms in South Korea 62
4.10.3 Policy and Market Mechanisms in New Zealand 62
4.10.4 Policy and Market Mechanisms in Russia 63
4.10.5 Policy and Market Mechanisms in Sub-Saharan 63
4.11 Impact of COP 15 on Carbon Policies and Emission Trading 64

5 Regional and Global Carbon Exchanges and Carbon Trading Markets 65
5.1 Increasing Role off Standard-Specific and Existing Registries 66
5.1.1 North American Markets 68
5.1.2 The Chicago Climate Exchange 69
5.1.3 European Union Emissions Trading System Market 71
5.1.4 The Australian Carbon Market 72
5.2 Project-Based Transactions by Region and Project Type 72
5.2.1 CDM and JI Buyers, Sellers and Over-the-Counter (OTC) Markets 73

6 Development of Certifications, Standards and Other Initiatives Facilitating Emissions Trading 76
6.1 American Carbon Registry Standard 77
6.2 The Climate Action Reserve Protocols 77
6.3 The CarbonFix Standard 77
6.4 Chicago Climate Exchange Offsets Program 78
6.5 Climate, Community, and Biodiversity Standards 78
6.6 EPA Climate Leaders Offset Guidance 78
6.7 Greenhouse Gas Services Standard 78
6.8 The Gold Standard 78
6.9 Greenhouse Friendly 79
6.10 ISO 14064 Standards 79
6.11 Plan Vivo 79
6.12 Social Carbon Standard 79
6.13 TUV NORD Climate Change Standard and VER+ Standard 79
6.14 Voluntary Carbon Standard 80

7 Competitive Landscape of Emission Trading Companies 81
7.1 3Degrees Incorporated 81
7.2 APX Incorporated 81
7.3 Baker & McKenzie 81
7.4 Blue Source 81
7.5 CantorCO2e 81
7.6 Climate Focus 82
7.7 Credit Suisse 82
7.8 EcoSecurities Group 82
7.9 Equator LLC 82
7.10 MGM International 82
7.11 Natsource 83
7.12 RNK Capital LLC 83
7.13 Sterling Planet, Incorporated 83
7.14 Tradition Financial Services/TFS Energy/TFS Green 83
7.15 TUV SUD America 83

8 Appendix 84
8.1 Abbreviations 84
8.2 Methodology 85
8.2.1 Coverage 86
8.2.2 Secondary Research 86
8.2.3 Primary Research 87
8.2.4 Expert Panel Validation 87
8.3 Contact Us 87
8.4 Disclaimer 87

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There is a variety of emissions trading proposals that differs in the details and in how draconian the measures are. One of the biggest points of variation is how the allocation of permits is handled. The emissions trading scheme instituted in the European Union allocated permits in most countries by a process called grandfathering. In this scheme, permits were awarded (for free) to existing firms based on the portion of national emissions they had created in the past. Firms could then freely trade the permits they had privately been awarded (through brokers, mind you), or in spot markets, where goods are sold for cash and immediate delivery.
A criticism of this cap-and-trade system has been that it has created huge profits for some firms that have produced the most emissions in the past. These firms have received a large number of permits and have been able to reduce their emissions more cheaply than the cost of permits. This has allowed them to make a large profit off the excess permits they could sell. Other proposals have used an auction scheme of allocation where firms bid on permits to buy them from the government. Under this scheme, the auction price of permits is essentially a tax, with the proceeds going to the government. Some of you may already be raising an important point: How much additional costs (read: overhead) the politicians pile on this tax for their friends and lobbyists affects how well the process works, or does not work.
Of primary concern for business planning is how an emissions trading scheme will affect the price of energy and transportation fuel. Unlike a carbon tax, where determining the cost is relatively straightforward, it is a much more difficult and complicated task to determine the costs imposed by an emissions trading scheme.
The cost of permits, which determines the increase to the cost of energy and transportation, depends on several variables in emissions trading schemes: the number of permits issued, whether the scheme covers one nation or is international, whether the use of carbon sinks (natural systems to soak up and absorb carbon dioxide, such as planting trees) is allowed, or whether a company can pay for carbon offsets in a country not covered by the trading scheme to meet its limitation.
International schemes have the advantage that emission reductions can be made in those countries where they are cheapest, while firms in those countries can sell their permits to firms in other countries where the cost of reducing emissions is higher. Allowing for the purchasing of carbon offsets in countries not covered by the scheme can have the same effect, as will allowing for the use of carbon sinks.
Some proposed schemes, such as one recently proposed in the U.S. Senate, consider a safety valve mechanism. The idea behind this is to make the system a hybrid emissions trading/carbon tax system. Permits are issued to limit total emissions, and these are traded among firms as needed. However, if the price of permits rises above a certain threshold, firms can then buy excess permits from the government at the threshold price. This amounts to an emissions trading system with a price cap. The advantage of this scheme is that it gives policy makers flexibility. They can set the number of permits and the price cap in such a manner as to achieve whatever exact policy they want from a pure carbon tax to a pure emissions trading system, all with a single mechanism.
Depending on the specifics of the trading scheme, and the specific nature of a given firm, emissions trading represents either a potential profit or a potential cost. Under any emissions trading scheme, the costs of energy and transportation will rise, just as it will under a carbon tax scheme. Some firms will be able to cover these costs with profits made from selling excess permits, while others (particularly heavy industry) will be hit with even higher costs. The key is to know where you stand and try to keep your options open as much as possible since it is likely that in the next administration and congress, there will be either a carbon tax or an emissions trading scheme in place.
What all this carbon tax debate is pointing to is the urgency to begin planning NOW for emissions trading inevitability to help protect your business from rising energy and transportation costs.

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The US administration’s declaration of its aim to reduce its GHG emissions over the 2008 levels has ignited hope to many that laws will be passed in no time that will enforce mandatory compliance among large operations among enterprises in the entire country. This concept moved forward from theory to a bill through the initiatives of the House of Representatives last year, though the Senate caused delay to the passage of the said bill.

Analysts expect to see a significant revival, in voluntary terms, for carbon market trading, due in large part to the recent declarations by Pres. Obama that the US will aim to cut down carbon emissions to a considerable percentage within the next ten years. Environmentalists have praised the announcement as they have been disappointed for quite a long time with the outcomes of the lack of action for the agenda of the Copenhagen Summit.

If the US Senate passes the equivalent of the American Clean Energy and Security Act, a “cap and trade” scheme will be set up as a mandatory market mechanism, similar in concept to the European Union’s Emissions Trading scheme or the current initiative underway in the United Kingdom. This will undoubtedly trigger demand for voluntary emission reductions as organizations take action to buy credits from an international market.

Carbon market trading is likely to see a boost through 2010 as US businesses seek to purchase credits internationally, as they seek voluntary emission reductions. This is very much tangible with much evidence such as the increasing demand for unit deals in other countries such as India, for example.

As of this writing, voluntary carbon emissions reductions would only represent a small fraction of the global emissions reductions, with certified reductions under the different schemes that are already existing way in excess. In the United States, the Chicago Climate Exchange is set up to operate a “cap and trade” scheme on a voluntary basis, although participants must commit to following through once they join.

US business leaders imagine that if they take proactive steps to engage, that they will be ahead of the game as and when mandatory carbon reporting comes into place. Their carbon market trading activities prompt them to purchase the voluntary emission reduction credits, which they can “bank.”

If mandatory carbon market trading is passed, it is likely to formulate a real cost for carbon as a traded commodity in the US. In addition to the sheer cost of purchasing energy, companies will have to account for the cost of emitting carbon as a consequence and this would place a very real additional cost to the bottom line.

With healthcare out of the way, it is likely that Pres. Obama will next turn his attentions to energy and we can expect to see the Senate take up potential passage of the ACES Act as 2010 unfolds.

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