(Abhishek Uppal, Clean Technology Private Equity 2009; Reference to DB Advisors Investing in Climate Change)
Since the inception of the Kyoto Protocol, the European Union’s Emissions Trading Scheme (ETS) and the UN’s Clean Development Mechanism (CDM) systems have come to represent the main implemented carbon markets. In 2007, the overall volume of global carbon emissions traded was 2.7 billion tons (Gts). Of this total, approximately 1.6 billion tons of CO2 was traded through the EU’s ETS system, while growth in trading volume and frequency within the EU ETS is expected to further increase in 2008. All member states of the European Union can auction up to 10% of their carbon allowance credits for the second phase of the EU ETS “cap-and-trade” scheme, from 2008 to 2012.
The United States currently has three emerging markets: Regional Greenhouse Gas Initiative 2003 (covers 10 North-East/Mid-Atlantic states), Western Climate Initiative 2007 (covers 11 US and Canadian states), and the Midwestern Governors Association 2007 (covers 12 US states). More importantly, with the Congress passing a revised version of a cap-and-trade bill, it provides a massive boost for carbon markets and would lead to explosive growth.
As of January 2008, more than half of the 907 CDM projects registered with the UNFCCC were located in China and India. India accounts for the largest share of these projects, but China leads in its total value of CDM projects.
