Future of Carbon Markets:Future of Carbon Markets:U.S. and Post-2012 RegimeU.S. and Post-2012 Regime

Joe Nation, Ph.D.

March 13, 2007

U.S. Move Led by State,Local Governments

• AB 32 (California) and Schwarzenegger executive orders most comprehensive, aggressive effort—1990 emissions levels by 2020—80% below 1990 levels by 2050—multi-sectoral approach—Market Advisory Committee (MAC) report due June 30, 2007—trading to begin Jan. 1, 2012—seek “linkages” with ETS, others

• Numerous local governments setting targets

Other U.S. States Engaged

• Regional Greenhouse Gas Initiative (RGGI) in northeast—limited to utilities

• New Jersey target 1990 levels by 2020, 80 percent below 2006 levels by 2050

• Western Regional Climate Action Initiative requires regional target in 6 months

• Total of more than 40 states with emissions targets or pending legislation

Federal (In)Action

• 106 bills introduced on climate, emissions in last Congress

• Numerous bills introduced—only Bingaman (D-NM), which contains price safety valves, likely to survive veto

• Unlikely any significant federal action before 2009

• Some suggest adopting law “like” California

Action Post-2012Highly Speculative

• Assume California, other states’ markets• Motivation at state level to force federal action• Climate unlikely to emerge as major issue in 2008

Presidential campaign, but new law likely during 2009-2012 period

• Action limited by U.S. voter support for emissions reductions, although three in four now view climate change as “serious” issue

Observations

• Voluntary market likely to grow significantly pending certainty of state, federal actions—colleges, governments, businesses taking unilateral actions

• Business increasingly supportive of emissions reductions

• Market, voters will lead political leaders—”pain” associated with steep reductions

Contact Information

Joe Nation, Ph.D.P.O. Box 9374

San Rafael, CA 94912 USA

+1 415.453.0388Fax: + 1 415.453.0488

joe@joenation.com