Buying and Selling The Atmosphere
Australia futures market seeks breath of fresh air
On August 30, Reuters carried an article by Michael Byrnes, reporting from Sydney, Australia.
According to Byrnes' report, Australia's futures exchange will set up the first market in the world to trade in fresh air. Technically the market will be in carbon sequestration credits, or units in amounts of carbon dioxide which have been absorbed by trees as an offset to greenhouse gas emissions.
SFE chief executive Les Hosking told a news conference that he expects the world's first exchange-traded market in fresh air to generate annual turnover of US$5 billion and to mark a step towards an Australian market in greenhouse gas emissions, which are already traded in a small way in Chicago.
Byrnes reported:The SFE also plans to set up a market in emissions, when the finishing touches are put on the United Nations-backed Kyoto protocol of 1997, which required developed countries to limit their emissions to agreed levels.
But while the world grapples with how to trade smoke, suddenly made valuable by limits to be placed on emissions from 2008, the SFE is launching its new fresh air market from the opposite end of the process -- fresh air credits earned from forest investments.
This will allow industrial concerns to buy carbon sequestration credits which can then be used as an offset to carbon belched into the air from the production of electricity, steel, aluminium and other high-emission industries.
``Trading in carbon credits is a new market for the 21st century,'' Bob Smith, chief executive officer of State Forests of New South Wales, said on Monday.
The SFE is planning to begin trading in carbon sequestration credits in mid-2000 as part of a strategy to make itself a centre for Asia-Pacific trading in emission rights.
By agreeing that developed countries as a whole cut their greenhouse gas emissions to at least five percent below 1990 levels for the period 2008-20122, the Kyoto protocol opened the way for industrial concerns to trade rights to the amount of gases they belch into the air.
The SFE's establishment of the carbon credits market well before the Kyoto protocol comes into force in 2008 will allow organisations to secure a competitive advantage, Hosking said.
The SFE and its subsidiary the New Zealand Futures and Options Exchange said on Monday it had signed a memorandum of understanding with State Forests of New South Wales (NSW) to develop the market.
``We intend to have this on a global basis where Internet access can be available,'' Hosking said of the new market. ``SFE can create a carbon trading market that is truly global.''
The NSW government wanted to see Sydney as a major Asia-Pacific trading centre for carbon credits, state Minister for Forestry Kim Yeadon said.
At least one major Japanese group, Tokyo Electric Power Co Inc, is already looking to enter Australia's fresh air market through a planned investment in up to 40,000 hectares of state forests, Yeadon said.
Power companies, steel and aluminium producers were all high-emitting industries which needed to manage their risks before the Kyoto Protocols were finalised, he said.
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