One of the consequences of the worldwide recession is that factories are producing less — and thus emitting less climate-warming carbon dioxide (CO2). That's good for the climate, but not so good for the once-booming carbon market.
Under a system laid down by the 1997 Kyoto Protocol, European and Japanese companies are given a limited number of permits to emit CO2. The United States opted not to participate in the Kyoto system.
If a company emits less than planned, it can sell its extra permits as credits to other companies that emit too much. Or entrepreneurs can build a wind farm that replaces a coal-fired power plant and earn credits to sell on the carbon market.
A Road Bump In A New Biz
But now there are too many credits chasing too few buyers. Last February, carbon credit prices hit an all-time low of about $10 a ton.
That has carbon brokers singing the blues. Many were in Washington, D.C., this week at the Carbon TradeEx, where carbon marketeers trade business cards and gossip.
"If you go back 12 months," says Kenneth Ivanic of World Energy, "everyone was very bullish that carbon prices were going to keep taking off, it was just 'To the moon, Alice' type of approach. Now as the recession has hit, we've seen people become much more realistic."
Ivanic says the recession hasn't killed the carbon business, but companies are less likely to spend on carbon-reduction projects if the price of the credits they get in return is dropping.
In fact, a lot of trading companies are now stuck with credits they can't or don't want to sell right now.
New Legislation Could Reinvigorate Carbon Market
But there's more to the business than trading CO2 credits.
Rick Saines says law firms like his, Baker and McKenzie, are doing well because businesses still need advice about what's in store for the future, especially American businesses.
"The fact is those that have money and capital to deploy, they're looking at clean tech," he says. "They're looking at renewables and they're looking at climate change as an area of growth in the future."
At present, there's less of a market for carbon in the United States because there's no mandatory cap on emissions here.
But that may soon change. Congress is weighing legislation to limit carbon emissions and set up a homegrown carbon market here, one that could dwarf the international market.
Aimee Barnes, an analyst with the company EcoSecurities, says the current carbon market is still a good place to be if you can wait out the hard times. "It's a very sexy industry to get into now," she says, "and there is certainly a lot of interest from both recent grads and from people looking to make a career switch. And I would say be prepared for a little frustration because it's still a very young market and there's a lot to be worked out."