California will become the next test site for emissions trading in the U.S. as exchanges line up new climate-related markets in the state, following the shelving of a national cap-and-trade plan to cut greenhouse gases.
Three exchange groups are preparing product launches for California after voters endorsed the states 2006 climate law in a referendum earlier this month. Supporters believe California will breathe new life into a U.S. carbon-trading market that has fallen dormant after a federal program was shelved this summer and interest cooled in other regional initiatives.
“It’s fair to say the focus of the U.S. [carbon] market at this point is 90% on California,” said Lenny Hochschild, a managing director at Evolution Markets, a carbon brokerage firm and partner in the Green Exchange, an emissions-focused venture co-owned with CME Group Inc. and a group of banks.
Carbon allowances and related derivative products are viewed by the exchange industry as a key long-term asset class that some advocates believe could grow into one of the largest derivatives asset classes.could become one of the largest commodities markets globally.
The volume of contracts on European cap-and-trade-emissions-related markets is seen approaching €100 billion ($136 billion) a year, and growing fast