In a recent entry about the EU market, I questioned how long it would take the US to catch up. An article at Bloomberg.com today reports that the high rollers are all wagering that the US market will bloom like a mushroom after a spring rain. The more risk averse are banking on change as soon as a new administration takes over in DC, but there is already action in Congress. The large US banks are already hiring carbon traders, who are busy buying inexpensive certified emissions reduction credits (1 CER = 1 tonne of CO2 equivalent or tCO2e) created under the Clean Development Mechanism (CDM) of the Kyoto Protocol. Most of the CERs are from China and India. The traders are counting on a 200-300% return on investment if the US carbon market takes off. One plan is to bundle carbon credits with power contracts. When US electric utilities are faced with carbon caps, the carbon credits will allow trader to sell power contracts at lower prices. We will see how it plays out. But with all the money queuing up, a large US carbon market appears to be a good bet.
