From the Economic Times (Times of India):
As the Kyoto Protocol reaches its final leg, it is increasingly clear that no successor agreement can be successful without India and China taking the lead.
Until the G8 summit at Heiligendamm this June, the role of China and India in climate change was primarily seen in terms of their potential contribution to the volume of certified- emission-reduction credits (CERs) from clean development mechanism (CDM) projects.
For industries in the developed world struggling to meet emission reduction obligations, CERs afford a cheaper way of offsetting their emission obligations. After Heiligendamm, perceptions have changed a wee bit. In addition to its commitment to the CDM, India has announced a voluntary national-level initiative to cap GHG emissions.
Al Gore’s ‘Inconvenient Truth’ has let loose a global warming mania. But Gore’s off-celluloid slogan “Give carbon a price” has produced a thumping impact amongst the movers and shakers of commodity markets who are unusually euphoric about carbon trade.
Gore’s philosophy on cap-and-trade is straight from market-maker’s workbook. Commodify carbon permits; trade it in commodity bourses to discover its ‘price’. Gore’s ideology is great music to the world of financial engineers and hedge funds who see in ‘carbon forward trade’ opportunities to trade in complex derivatives and actuarial instruments.
Indeed they have already cashed in. Speculative positions are taken regarding the likelihood of CERs fructifying from CDM projects or about the likelihood of carbon credits trading in price bands that are below the modal marginal abatement costs of large companies of the developed world. Interestingly, much of the speculation in carbon markets last year centred on supply prices for ‘to be born CERs’....MORE