What is the carbon market: Is there a final answer?

Excerpt

The potential for sequestering carbon in agricultural and forestry sinks to generate carbon credits has received increased attention by legislative bodies, government and nongovernment organizations, private firms, farm managers, and universities over the last few years. This increased interest is primarily due to international regulation of greenhouse gas (GHG) emissions under the Kyoto Protocol. Although the United States has not ratified the Kyoto Protocol, a voluntary market and many state and regional initiatives have been developed to reduce atmospheric concentrations of GHGs. In addition, recent legislation proposed within the United States promotes a cap-and-trade system for reducing GHGs (Pew Center 2008; RFF 2008). Since our first examination of fledging carbon credit markets and factors affecting them (Williams et al. 2005), many new markets have developed, as well as new opportunities to reduce GHG emissions.

Several countries have developed GHG markets to help meet their mandatory GHG reductions under the Kyoto Protocol or other regulations. In addition, voluntary markets have formed outside the regulatory constraints to serve businesses interested in trading carbon credits, and there are a number of carbon offset providers that sell offsets to consumers and businesses. Table 1 summarizes the main market types that exist at present. The…