Report shows emerging greenhouse gas market

Washington, DC, March 19, 2002 — Emissions trading has become the “policy of choice” for addressing climate change, according to a new report from the Pew Center on Global Climate Change that documents the emergence of a market for greenhouse gas emissions.

While the market remains fragmented, the report concludes that trading activity has increased around the world over the last five years. Among the forces bringing trading to the fore are progress in the international climate talks, new carbon trading systems in Europe, and private sector trading initiatives in the United States and elsewhere.

The Pew Center report, The Emerging International Greenhouse Gas Market, describes the characteristics of the market to date and key features of early trades. In the absence of a ratified international agreement, the report’s authors conclude that the new market is evolving in a fragmented way.

Regional, national, and subnational trading programs are operating under different rules, which could inhibit “market convergence” and increase the costs of trading. “Despite the United States’ inaction, it is abundantly clear that we are beginning to see the outlines of a genuine greenhouse gas market,” said Eileen Claussen, President of the Pew Center on Global Climate Change.

“Governments and businesses around the world understand that emissions trading is essential if we’re going to address this issue in the most cost-effective way possible.”

“The challenge now is to forge links between these emerging regimes in order to ensure that trading systems are compatible, ” Claussen said. “We are already beginning to see interest in the U.S. Congress, and private sector efforts to build a trading system are even farther along. The need for certainty, consistency, and a level playing field will encourage a merging of trading regimes.”

The report also evaluates the potential evolution of the greenhouse gas market, particularly in light of recent developments in climate change policy in the United States and internationally.

The report’s conclusions are based on a review of greenhouse gas transactions to date, including case studies of two transactions between four utilities: TransAlta and HEW, and PG&E and Ontario Power Generation. According to the authors of the report, the experiences of these companies illustrate the benefits of trading, as well as the challenges of conducting trades in a nascent market that is lacking in clear rules.

Part of “Solutions” Series The Emerging International Greenhouse Gas Market was authored by Richard Rosenzweig and Matthew Varilek of Natsource, LLC, and Josef Janssen of the University of St. Gallen in Switzerland. It is the latest report in the Pew Center’s Solutions series, which is aimed at providing individuals and organizations with tools to evaluate and reduce their contributions to climate change.

Other Pew Center series focus on domestic and international policy issues, environmental impacts, and the economics of climate change. A complete copy of this report — and previous reports — is available on the Pew Center’s web site,

The Pew Center was established in May 1998 by The Pew Charitable Trusts, one of the United States’ largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is an independent, nonprofit, and non-partisan organization dedicated to providing credible information, straight answers and innovative solutions in the effort to address global climate change.

The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.

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