Friday, May 22, 2009

Carbon Trading: A Major Growth Industry?

There are many ways to think about carbon emissions trading schemes, but one that should not be overlooked in the environmental and natural resources communities is the very real possibility that carbon trading will evolve into a major new business opportunity.

Currently there is one mandatory emissions trading scheme -- the European Union ETS. Last year the total market value for carbon trading was about $120 billion, according to an article in The Wall Street Journal ("Trading May Yet Bloom," May 21, 2009). But what if the U.S. enacts a similar scheme? Then the market may grow to more than $2.1 trillion by 2020, according to the London-based consultantcy New Carbon Finance.

Some investment banks in the U.S. have been preparing for this day -- Morgan Stanley and Barclays PLC have carbon trading desks, the Journal reports.  And even Russian gas giant Gazprom is in the carbon trading business.

To be sure, the price of carbon has gone up and down like a yo-yo. But with the U.S. inching closer to some sort of carbon restrictions, it would seem a pretty good bet that this market is going to represent an enormous business opportunity in future years.

That is, of course, if these banks are still around at that point. Last time I checked, many investment banks were begging for government bailouts. Has anybody thought about turning the U.K. and U.S. banking systems over to Steve Jobs and Apple? An "ibank" may be in our future.

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