Is Carbon Trading the Solution to Global Warming?

July 21, 2008

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CNN had a story over the weekend on carbon trading. Supporters of carbon trading say it offers companies incentives to become sustainable and targets polluting companies where it hurts most – their wallets. But the cost incurred by companies could be passed down to consumers.

Abyd Karmali, the global head of carbon emissions for Merrill Lynch, says he believes financial pressures could be the way to make companies and individuals reduce emissions, adding that price volatility will ease off once people get used to energy efficiency and sustainable living.

“[The companies] are passing costs on to the consumer, but what we are now seeing in Europe is an increasing demand for energy efficient products,” said Karmali.

The carbon market could become the largest commodity market, the Financial Times recently reported. “Even with conservative assumptions, this could be a $2 trillion futures market in relatively short order,” according to Bart Chilton, commissioner of the Commodities Futures Trading Commission.However, some critics see carbon trading as a zero-sum game as any investment in CO2 savings is neutralized by the fact the purchasers have avoided reducing their own CO2 emissions.

According to a January report from Point Carbon, an Oslo-based group of GHG analysts, the global carbon trade rose 80 percent last year to $60 billion.

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