May 15, 2000

Business Week Article Highlights Carbon Market Emergence

A May 15 article in Business Week discusses recent initiatives to build a global market for carbon emission abatement. The article highlights the internal trading programs of companies such as British Petroleum and Royal Dutch/Shell, as well as national emissions trading projects being proposed by the UK and Denmark. A large number of major corporations are concluding that regulations calling for emissions reductions are unavoidable.

According to the article, inter-company trading is already taking place. Citing the Ontario Power Generation purchase of emission reductions from Zahren Alternative Power Corporation, the article quotes Dr. Richard L. Sandor, Chairman and CEO of Environmental Financial Products LLC of Chicago, who believes that "emissions trading is an idea whose time has come."

Companies now recognize that trading provides an inexpensive way to deal with emissions reductions. Judith Bayer, director of environmental affairs at United Technologies, believes businesses must look for the most cost-effective ways to reduce emissions, regardless of where these reductions are achieved.

The article says that a precursor of the concept of a global carbon emissions trading system has been the SO₂ (sulfur dioxide) trading program in the U.S. This program has worked extremely well in cutting acid rain levels. Early price forecasts from industry groups claimed it would be extremely expensive to comply, citing costs of $1,000/ton of sulfur dioxide. Today's trades show prices of $131.

According to the magazine, some legislators in Washington, such as Senator Joseph Lieberman (D-Conn.), point out that emissions trading is an American concept, but are concerned that the country might miss opportunities in the emissions trading market if it does not take stronger action on the climate issue.

Meanwhile, the private sector in the U.S. and abroad continues to move forward with trading initiatives and voluntary commitments to reduce emissions, as seen from the latest actions by UTC, DuPont, BPAmoco and many others. The article concludes by quoting Dr. Sandor, who believes that as the small cost of emissions trading becomes apparent, resistance to action will considerably diminish.