WASHINGTON, Feb 14, 2008 -- Comtex

The United States will be home to a 1 trillion U.S. dollar carbon emission market by 2020 if its federal and state policymakers continue on their current path towards a comprehensive "cap-and-trade" program that is confined to domestic trading only, a latest analysis released on Thursday said.

The new analysis was released by New Carbon Finance, a division of New Energy Finance, the world's leading provider of information and analysis in the renewable energy and low-carbon sectors.

Researchers predict that in 12 years a carbon-constrained U.S. economy that includes a cap-and-trade system allowing only domestic trades will produce a 1 trillion U.S. dollar carbon trading market -- more than twice the size of the European Union's Emissions Trading Scheme, and a carbon price of 40 U.S. dollars per ton as soon as 2015, which will result in a rise in consumer energy prices.

Currently, most of the 13 climate change bills being discussed in the U.S. House of Representatives and Senate propose some sort of market-based mechanism such as a cap-and-trade system, complemented by direct regulation.

Under a "cap-and-trade" system, the federal government would ration the amount of carbon dioxide and other greenhouse gases that businesses emit by issuing them permits. A business wanting to emit more than its entitlement may buy the right to do so from a business that emits less than its entitlement.

An economy-wide cap-and-trade system for U.S. greenhouse gases operating within four to five years seems inevitable, the researchers say.

"Even if the current Bush administration rejects all of these bills, the next president will be less inclined to use a veto. All leading 2008 presidential candidates have endorsed the need for action and some have already supported significant emissions reductions," says Michael Liebreich, CEO of New Energy Finance.

Without exception, however, the bills before Congress either prohibit or severely restrict the transfer of allowances from trading systems in other parts of the world.

"This will have two important consequences. For the U.S. market, it will rule out a significant source of inexpensive abatement, pushing the carbon price to unnecessary high levels. It will also remove most U.S. demand for international credits, hampering the growth of projects and technology transfer to developing countries, " says Milo Sjardin, who heads the North American division of New Carbon Finance.

News Provided By