The World Bank and the International Emissions Trading Association convened their annual Carbon Expo with upwards of 1500 delegates all focused on the continued development of the global carbon market.  Questions and comments throughout the conference relate to the “change in tone” from the United States since the election of President Obama and what the US’s cap and trade system will look like.The political reality that has yet to penetrate global carbon market participants is whether the US will have a cap and trade system at all.  Carbon Expo keynote speaker, Ricardo Lagos Escobar, Special Envoy on Climate Change for the United Nations and former President of Chile, spoke optimistically of an agreement being reached at Copenhagen in December 2009 with the US as a full participant.  Even those speakers aware of the political challenges in the US focused not on the fundamental questions that remain before any cap and trade system can be enacted, but on such details as how Clean Development Mechanism offset credits will be accepted in the US.

Experienced carbon market participants, particularly those actively involved in the European Union Emissions Trading System, appear convinced that a cap and trade system can both achieve environmental objectives and do so in an economically efficient manner.  That case has not been made yet in the US and—at least for the moment—is not being made.  Cap and trade supporters in the US seem to assume that these concepts are entrenched and understood not only by the public at large, but also by policymakers in Congress and the Executive.

In the meantime, opponents are busily rebranding cap and trade as “cap and tax,” an effective ploy at a time of great financial uncertainty and an audience with little apparent appetite to raise taxes.  Cap and trade proponents need to join the debate at the most fundamental level if they hope to see such a system enacted in the US.

For further information about this topic, please contact Akin Gump.