Regional Carbon Markets in North America to be worth $100 Billion in 2016
Washington, DC – February 25, 2010 – If the United States does not pass and reconcile pending legislation in the near future to create a federal cap-and-trade program for greenhouse gases, North America will likely see a patchwork of regional cap-and-trade programs. North America’s carbon market would emerge from two pending initiatives running alongside the already active Regional Greenhouse Gas Initiative (RGGI), establishing greater emissions trading systems (ETS) in the United States and Canada. The two pending initiatives are the Western Climate Initiative (WCI) and the Midwest Greenhouse Gas Accord (MGGA). Such a patchwork system would have a value of $100 billion in 2016 with allowances for carbon dioxide equivalent (CO2e) costing $42 per ton.
The projections are detailed in Point Carbon’s latest North American Research report Plan B- Going it Alone: Regional Programs in North America. Point Carbon is the leading independent provider of market intelligence, news, analysis, forecasting and advisory services for the energy and environmental markets.
In the report, Point Carbon examines different outcomes for the regional initiatives taking into account potential stringency of the cap, amount of greenhouse gas emissions covered, offset provisions and political probability among other factors. Point Carbon sees as most likely a scaled-down version of WCI that includes California, New Mexico, Oregon, Washington and Canadian Provinces alongside a revamped version of RGGI starting after RGGI’s forthcoming review in 2012. In this reference scenario, regional programs would have a cumulative cap of 8.8 billion tons over the 2012 – 2020 covering roughly 485 companies. This cap results in a reduction of US and Canadian 2020 emissions by 107Mt and 83Mt respectively, achieving about 41 percent of the US and 24 percent of Canada’s pledged emission reductions. Any scenario including the MGGA is viewed as unlikely for the time being.
“North America enjoys federalism that allows proactive states to move forward if the federal government does not, and as we have seen with RGGI several states are ready to have a cap-and-trade system up and running now. California’s policies will be a driving force going forward in the absence of a US ETS, but I’m confident that carbon markets will continue to grow in North America regardless. The question is only by how much.” Said Emilie Mazzacurati, editor of the report and head of Point Carbon’s North American Research team.
In the event of no action from Washington, all eyes will turn to Sacramento as California proceeds to act on its previously passed climate change law AB32. Point Carbon places the probability of California moving forward with a cap-and-trade system pursuant to AB32 at 70 percent. Once California acts, many other parties of WCI will likely move forward and accelerate the development of its proposed ETS.
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