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Developers hopeful about a U.S. carbon-trading market

From Reuters

January 20, 2007

NEW YORK — Carbon-trading market developers hope that a potential billion-dollar U.S. market will move closer to reality now that major companies are urging legislation to set mandatory curbs on the gases linked to global warming.

"We are ready to jump into the U.S. with both feet," said Richard Rosenzweig, chief operating officer at New York-based carbon asset management company Natsource.

Ten major U.S. corporations, including Aloca Inc., DuPont Co. and General Electric Co., have joined with environmental groups to form the U.S. Climate Action Partnership, the Natural Resources Defense Council said Friday.

The group will urge President Bush and Congress to pass laws curbing emissions of heat-trapping gases. That would create a market in which companies that produce emissions below the set limit can sell credits to others that generate excess emissions.

Scientists link the buildup of the gases, such as carbon dioxide emitted from sources like smokestacks, cars and the burning of forests, to higher temperatures and melting glaciers, which could increase the frequency of deadly heat waves, flooding and storms.

The European Union, which set up a market to meet its emission requirements under the Kyoto Protocol, has traded about $20 billion in credits in just a few years.

"This is the next market," said Peter Fusaro, a carbon markets expert and founder of energy consulting firm Global Change Associates in New York, said of the U.S., the world's top emitter of carbon dioxide.

The EU carbon market allows companies to trade permits with one another or shop around in the developing world for the cheapest ones.

But for such markets to work, governments have to set mandatory limits on the gases. Bush pulled the U.S. out of the Kyoto Protocol and has opposed mandatory curbs.

The Climate Action Partnership follows moves by Exxon Mobil Corp. to meet with other corporations on climate legislation options.

The energy giant, long a source of ire for environmentalists and carbon market developers, is in talks with about 20 companies hosted by Resources for the Future, a Washington nonprofit organization. The talks are expected to generate a report to legislators by the fall on how climate policy options might affect sectors of the U.S. economy. Exxon has met separately with green and religious groups on warming.

Although the Climate Action Partnership supports a carbon market, Exxon, which has long opposed investing in alternative energies that cut emissions, such as solar power, has not changed its position.

But environmentalists and carbon market developers say companies have moved faster on warming since the Democrats won control of Congress in November. Also, potential 2008 presidential contenders from both parties favor mandatory carbon markets.

"It's enlightened self-interest," Fusaro said about the corporate effort to shape favorable legislation. "They want to get in front of the curve, and they have technologies to sell."