In 2005, the European ETS was implemented for European countries to meet their Kyoto obligations. Many lessons have been, and continue to be, learned as the Europeans continue with their quest.
The remaining Kyoto-obligated countries have been struggling to come up with their own schemes, with most embroiled in a mix of politics versus economics versus environmental impacts. Many a heated discussion inside nations include price caps, intensity regulations, domestic schemes, border taxes …
In the meantime, however, the world is marching forward, with some parts of the USA at the front of the pack, and the market is creating a momentum of its own— with or without in-country compliance-based emission trading schemes. This demand has created two very distinct trading markets—a compliance carbon market (only operational in Europe today, pending policy passing in New Zealand), and a voluntary carbon market.
In the compliance market, companies either purchase credits or invest in technologies and strategies to meet their legal carbon emission obligations.
In the voluntary carbon market (the fastest-growing market where interestingly the largest growth in 2007 came from the only compliance region—Europe—at 47 percent, according to the Ecosystem Marketplace report released in May 2008), companies are purchasing carbon credits to become carbon neutral, not necessarily to do the right thing by the environment, or for corporate responsibility reasons, but rather to ensure business sustainability.
As more and more companies recognise the necessity of understanding and implementing an environmental strategy that suits their business, they quickly grasp there are two opportunities: one is to purchase (and often trade) carbon credits, and the other is to find new and creative technologies in which to invest, in order to reduce their overall carbon emissions. The latter also results typically in more efficient and cost-effective business operations, and by default increasing overall company profitability and value.
And thus, a new era has been born. With a technology career and background spanning 25 years, I can only liken carbon markets to the information age of the 1980s. A market filled with excitement, disbelief, knowledge (and know-it-alls!), despair and opportunity.