Say hello to the green exchange, spearheaded by a leading cast of energy and environmental brokers -investors- who are launching a new exchange for trading credits that offset the global warming greenhouse gas emissions.
This exchange is expected to rapidly broaden the reach of the booming market for trading greenhouse gas as well as renewable energy credits. The exchange is staged to start in the first quarter of 2008. The affliated partners in this venture are Nymex Holdings and Evolution Markets, the biggest broker of environmental credits. Also, notable investment banks are involved such as Morgan Stanley, Merrill Lynch, JP Morgan and Credit Suisse.
This earmarks the largest energy exchange partnership with the biggest players in the environmental brokerage industry. Recently, the member countries of the ratified Kyoto treaty have agreed to cut their emissions of greenhouse gases. The European Climate Exchange has adapted a cap-and-trade system that will limit carbon emissions through utilities and industries. The companies that exceed the cap can buy allowances from those that fall under the cap.
The U.S. has not joined the Kyoto treaty which makes the market for carbon credits voluntary. Here is how it works, a corporation can buy carbon credits which will in turn offset the greenhouse gases it produces by subsidizing the planting of a new forest, for example. The forest and the new plant life therein will effectively work to remove CO2 from the atmosphere. Voluntary U.S pollution offsets and renewable energy credits will also help subsidize wind farms and solar plants.
There is a mounting storm of banks and investors eager to join in the trading of carbon credits mostly due to the fact that the U.S. government is planning to impose a cap-and-trade system after the elections in 2008. This new system should rocket the price of U.S. credits from $2 to $5 per ton of carbon to $30 to $50 per ton. A substantial increase in as many months and strong profits are expected to be made.
The belief behind this large partnership is that it will reach far and wide and it will create more emission reductions at lower prices. Currently the U.S market for voluntary credits is $100 million per year, a scant pittance compared to the current global market trading at nearly $60 billion.