For Release: April 17, 2009
Washington, DC — Even before legislation to address global warming has passed the U.S. Congress, government regulators are preparing for what could be the largest commodity market ever: carbon trading. The U.S. Congress is expected to consider in the very near future climate change and energy legislation centered around a cap-and-trade system that would reduce American greenhouse gas emissions 20% by 2020, and 83% by 2050. Hearings on the legislation are expected to begin when Congress returns to Washington next week. “Regulation of these important environmental markets is something we need to get right,” said Commodity Futures Trading Commission (CFTC) Commissioner Bart Chilton, who chairs an advisory committee addressing the issue.
The CFTC regulates futures markets and is expected to monitor and oversee the trading of derivative products associated with carbon dioxide allowances. Expansion of the Commission’s existing energy committee to create the Energy and Environmental Markets Advisory Committee, or EEMAC, which Chilton announced today, will significantly enhance the CFTC’s ability to anticipate and address regulatory issues pertaining to both energy and environmental trading markets.
“The mission, mandate and membership of the EEMAC is being expanded to ensure that we are ready for what could be a $2 trillion market in the future,” Chilton said. “We will have impressive experts who will help us as we try and figure out what needs to be done on day one after legislation becomes law.”
Since the 1990’s, the CFTC has regulated environmental markets, such the sulfur dioxide derivatives market that came into existence after the passage of acid rain legislation. "We have a proven track record as a sure-footed regulator of environmental markets since 1995," the Commissioner noted.
The EEMAC, which up until now was focused on energy markets, will include new members with expertise in climate change and environmental markets. The first meeting will be held on May 13th at the CFTC's headquarters in Washington.
The European Union began a cap-and-trade system in 2005; it has, however, encountered problems such as an initial over-allocation of allowances that limited effectiveness. “I’m hopeful we in the U.S. can learn from the European experience to ensure that these markets take off in an orderly, efficient and effective fashion,” Chilton said. Commissioner Chilton, in remarks to reporters this morning stated, “This issue is too important to our economy and to our world, and we need to get this right from the get go.”
R. David Gary
Last Updated: April 22, 2009