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Market Muscle: Can Cap & Trade Cut Carbon?

Market Muscle
Reported by
Christine Van Lenten

Posted February 08, 2007


A November 9, 2006, meeting at the Academy examined the status of, and prospects for, two mandatory, market-based approaches to curbing the emissions of greenhouse gases that are driving climate change: the U.S. Northeast states' Regional Greenhouse Gas Initiative (RGGI) and the European Union's Emissions Trading Scheme (EU ETS).

The approach taken by RGGI was described by panelist Luis G. Martinez, an attorney with the Natural Resources Defense Council (NRDC). The EU ETS and its international framework were discussed by panelist Véronique Bugnion, an expert on energy and environmental markets and director of research at Point Carbon. The panel's moderator was E. Gail Suchman, an attorney with Gilberti Stinziano Heintz & Smith, P.C., and senior legal advisor to the Urban Design Lab for Sustainable Development at Columbia's Earth Institute.

Use the tabs above to find a meeting report and multimedia from this event.



This conference and eBriefing were made possible with support from the Sallan Foundation.

Web Sites

Note to readers: The eBriefing on the 2005 panel on RGGI and New York State's Renewable Portfolio Standard includes a hefty "Resources" section, much of which remains timely. See New York Tackles Climate Change: Promoting Renewable Energy and Capping Greenhouse Gas Emissions.

Since then the number of Web sites and publications on the subjects of carbon cap-and-trade programs, CO2 emissions, and climate change has exploded. What follows is the merest sampling.


Carbon Market Insights 2007
Sponsored by Point Carbon, this conference, to be held March 13–15 in Copenhagen, will feature Al Gore. Its agenda includes the following topics:

    • Will the EU ETS be short in its second phase (2008–2012) and therefore lead to real reductions in emissions?
    • Will supply from CDM and JI projects flood the market?
    • Will the emerging carbon market revitalize the nuclear energy industry?

Carbon Expo
This annual conference and trade fair will next be held May 4–7, 2007, in Cologne, Germany. The 2006 conference program (PDF, 1 MB) included many topics related to the EU ETS.

Linkages — International Institute for Sustainable Development
This Web site will overwhelm you with choices. See its page listing upcoming meetings on climate and atmosphere.

Government and Government-related

Carbon Trust
The trust is an independent company funded by the UK government "to help the UK move to a low carbon economy by helping business and the public sector reduce carbon emissions now and capture the commercial opportunities of low carbon technologies." See its position on and strategy for using offsets.

Center for European Economic Research
See the details of its Climate Platform pages, which examine policy design, including emissions trading, and lots more.

DEFRA (Department of Environment, Food, and Rural Affairs)
This UK agency maintains informative Web pages on the EU ETS and the UK's participation in it.

European Trading Scheme
Here it is—complete with a useful Q&A primer and multilingual glossary. The Web site offers tons of information and links to more.

Governor of California
See his substantial Climate Change Portal and a press release on the state's ambitious new mandatory greenhouse gas cap-and-trade program.

Intergovernmental Panel on Climate Change
Established by the World Meteorological Organization and the United Nations Environment Programme in 1988, the IPCC assesses scientific, technical, and socio-economic information relevant to understanding the risk of human-induced climate change, its potential impacts, and options for adaptation and mitigation. Assessments are based mainly on peer reviewed and published scientific/technical literature. The fourth assessment report was issued on February 2, 2007.

New York State Department of Environmental Conservation
On December 5, 2006, DEC invited public comments on a pre-proposal of its adoption of the RGGI model rule.

Regional Greenhouse Gas Initiative (RGGI)
RGGI's Web site provides extensive documents and data, including information related to leakage, allocations, and auctions, and a list of electricity generating units that may be subject to RGGI caps.

Sponsored by a consortium, the Technology Transfer and Investment Risk in International Emissions Trading project explores economic and industrial impacts and prospects for achieving technology transfer associated with Kyoto's flexible mechanisms. It is also exploring the potential for linking trading markets.

Risoe Centre on Energy, Climate and Sustainable Development
Supported by the UN Environment Programme, this center offers seemingly infinite technical information on CDM projects.

UN Framework Convention on Climate Change
This Web site provides full text of the Kyoto Protocol and extensive information on its implementation. Pages devoted to the November 2006 Conference of Parties in Nairobi reveal the nitty-gritty of trying to move Kyoto forward.

U.S. Department of Energy
Its "Power Utilities" page is a good place to start. See links to "Learn More" and "Related Offices."


Carbon Mitigation Group
Based at Princeton University, this initiative is a joint venture with BP and Ford Motor Company. The Web site features Stephen Pacala and Robert Socolow's much-discussed paper on carbon-emission stabilization wedges.

Carbon Tax Center
The center was launched in January 2007 to "educate and inform policy makers, opinion leaders, and the public, including grassroots organizations, about the benefits and critical need for significant, rising, and equitable taxes on the carbon content of fossil fuels."

Earth Policy Institute
See this valuable Web site's page on 2005 CO2 emissions for a dismaying snapshot of the problem.

Environmental Justice and Climate Change Initiative
The initiative works to educate and activate the people of North America toward creation and implementation of just climate policies in domestic and international contexts.

International Emissions Trading Association
If you seek total immersion in the nitty-gritty of emissions trading, and for timely news, explore this Web site at length.

Natural Resources Defense Council
This leading environmental advocacy organization has a well-stocked Web site. See, for example, its report Benchmarking Air Emissions, which reports and compares air pollutant emissions for the 100 largest U.S. electric power producers in 2004.

Pew Center on Global Climate Change
This site offers comprehensive information, including a page devoted to RGGI, a report on the UN conference on climate change in Nairobi, and a list of current emissions-reduction targets.

Resources for the Future
This institute analyzes environmental, energy, and natural resource topics, to provide policy, business, environmental, and civic leaders with tools and approaches for improving environmental policymaking worldwide. Its Web site is loaded with information related to cap-and-trade programs. See, for example, its list of papers on, and a feature on, RGGI.

Wuppertal Institute for Climate, Environment and Energy
Scroll down this German research institute's Web site for hard-core information galore on CDM and JI projects. Among many wonders: JET-SET, a project investigating what it could mean and what it would take to link emissions trading schemes.

Private Sector

Carbon Climate Market
This London-based firm develops and manages funds that invest in companies and projects aiming to reduce greenhouse gases.

Carbon Credit Capital
This firm develops biomass energy, hydro and landfill gas projects in Africa, Asia, and Central and South America to supply governments and companies with sustainable reduction carbon credits to meet greenhouse gas regulatory or voluntary obligations.

This company sources, develops, and trades carbon credits around the world. Its Web site offers an interesting look at how such a business works.

Proclaiming itself "the world's premier marketplace for trading carbon dioxide emissions," the European Climate Exchange (ECX) is a sister to the Chicago Climate Exchange (CCX), the "the world's first and North America's only voluntary, legally binding, rules-based greenhouse gas emission reduction and trading system."

Make Markets Work for Climate
A conference by this name was held in the Netherlands in October 2006. Its Web site presents abundant information about the proceedings, including video of the sessions and a valuable and beautifully illustrated Background document (see link to PDF file).

Point Carbon
Véronique Bugnion's firm provides independent analysis, forecasting, market intelligence, and news for the power, gas, and carbon emissions markets. Its exceptionally useful Web site offers a look at how these sectors operate. It also offers a primer on carbon markets (Carbon Market ABC); an explanation of market mechanisms; glossaries related to carbon emissions and trading; a free biweekly e-newsletter, Carbon Markets North America; a report on the state of the market, Carbon 2006; and much more.

The United States Climate Action Partnership is a new alliance of major businesses and leading environmental groups that are jointly calling on the U.S. federal government to enact legislation requiring significant reductions of greenhouse gas emissions. Its January 22, 2007, news conference made headlines. Its report, A Call for Action, sets forth its principles and recommendations to guide the formulation of a regulated economy-wide, market-driven approach to climate protection.


Bayon R, Hawn A, Hamilton K, eds. 2006. Voluntary Carbon Markets: An International Business Guide to What They Are and How They Work. Earthscan, London.

BBC News. 2007. EU plans 'industrial revolution'. (January 10). This news story reports on the European Commission's proposed, unprecedented, Common European Energy Policy.

Bucher B, Ellerman AD. 2006. Over-allocation or abatement? A preliminary analysis of the EU ETS based on the 2005 emissions data. Fondazione Eni Enrico Mattei, working paper No. 139.06. (Nov.)

Bugnion V. 2006. US carbon markets: status, scope and timeline. Energy Risk (September) (subscription required).

Bugnion V. 2006. US emissions: state of play. Energy Risk (September) (subscription required).

Burtraw D, Kahn D, Palmer K. 2005. CO2 allowance allocation in the Regional Greenhouse Gas Initiative and the effect on electricity investors. (December; PDF, 364 KB)

Canine C. 2006. California illuminates the world. On Earth (Spring).
This comprehensive article, in a journal published by NRDC, examines California's varied efforts over the years to reduce energy consumption.

Capoor K, Ambrosi P. 2006. State and trends of the carbon market 2006 (update: January 1–September 30, 2006). The World Bank, Washington, DC.
Many pages of close, clear analysis accompanied by some colorful graphics.

Congressional Budget Office:

2006. Evaluating the role of prices and R&D in reducing carbon dioxide emissions. Congressional Budget Office, Washington, DC. (September)

2005. Limiting carbon dioxide emissions: prices versus caps. Congressional Budget Office, Washington, DC. (March 15.)
This "issue brief" contends that setting a price on emissions would be likelier than capping emissions to "to maximize the difference between the policy's total benefits and total costs."

2003. Shifting the cost burden of a carbon cap-and-trade program. (July)
This paper was prepared at the request of Senators John McCain and Joseph Lieberman, who introduced legislation on climate change.

Goodell J. 2006. Capital pollution solution. The New York Times Magazine (July 30).
An examination of the Chicago Climate Exchange, a voluntary carbon market. (See entry for the CCX Web site, above.) Goodell is also the author of Big Coal: The Dirty Secret Behind America's Energy Future.

Hawk J. 2006. China could be main greenhouse gas culprit by 2010. SciDev.Net (November 8).

M. Stanley Gives US$3 Billion Confidence Vote in Kyoto. 2006. Reuters, Planet Ark (October 27).

Ogodo O. 2006. UN plan aims to share carbon projects more fairly: the initiative will help Africa plan for climate change. SciDev.Net (November 16).
This article reports on a UN initiative to help developing nations—especially in Africa—participate in carbon finance projects such as CDM projects.

Paolella MS, Taschini L. 2006. An Econometric Analysis of Emission Trading Allowances.Swiss Finance Institute Research Paper No. 26 (November).

Q&A: Europe's carbon trading scheme. 2006. BBC News. (December 20)

Strauss D. 2006. French PM calls for European carbon levy. Financial Times (November 13).

The Economist:

Compressed: the European Commission insists, belatedly, on tighter emissions caps. 2006. (November 30)

Soot, smoke and mirrors. Europe's flagship environmental programme is foundering. 2006. (November 16)

The Stern tendency: markets can help clear the air. 2006. (November 6)

Terminating greenhouse gases: what Europe's failing effort to cut carbon emissions can teach California. 2006. (October 19)

Upset about offsets: as the business of offsetting emissions grows, it is coming under more scrutiny. 2006. (August 3)

UN Food and Agriculture Organization (FAO).
FAO publishes working papers on forests and climate change. See papers No. 3 and No. 4 for a sense of the complexity of defining offset projects.

Velasquez-Manoff M. 2006. How to keep New York afloat: with sea levels rising, once-a-century floods may become once-in-20-years events. One solution: huge storm-surge barriers. The Christian Science Monitor (November 9).


E. Gail Suchman, Esq.

Gilberti Stinziano Heintz & Smith, P.C.
e-mail | web site

E. Gail Suchman's expertise encompasses environmental, energy, and land use law. She recently joined the law firm of Gilberti Stinziano Heintz & Smith as a member of its Environmental and Land Use Practice Group and as managing attorney of its New York City office. She also teaches at Columbia Law School and Columbia's School of International and Public Affairs, and she is senior legal advisor to the Urban Design Lab for Sustainable Development at Columbia's Earth Institute.

Suchman began her legal career 25 years ago, as an enforcement attorney at U.S. EPA Region V, in Chicago. Subsequent positions included assistant attorney general in the Environmental Protection Bureau at the New York State Attorney General's Office, regional director for the Massachusetts Department of Environmental Protection, and senior environmental counsel for New York Lawyers for the Public Interest, where she represented low-income communities in litigation and transactional matters involving environmental protection, land use, and community economic development. She co-authored Brownfields Basics: A Guide to Rebuilding Our Communities and has lectured widely on a broad range of issues. In 2003, she advised the South African government on legislative, regulatory, and enforcement matters.

Suchman is a member of the Executive Committee of the New York State Bar Association's Environmental Law Section, is legislative liaison for the Energy Committee of the New York City Bar Association, and chaired the Environmental Subcommittee of the City Bar Association's Special Task Force on World Trade Center Redevelopment. She serves on the New York City Mayor's Energy Policy Task Force and is a member of the New York State Department of Environmental Conservation's Environmental Justice Advisory Group.

In 2000 she received the Wasserstein Public Interest Law Award from Harvard Law School. In 2003 she was designated a Senior Specialist by the Fulbright Scholarship Board and Council for International Exchange of Scholars.

Suchman holds a JD degree from Boston College Law School and a BA in environmental science and engineering from Northwestern University.


Luis G. Martinez, Esq.

Natural Resources Defense Council (NRDC)
e-mail | web site

Luis G. Martinez is an attorney with NRDC's energy program. His work focuses on state energy and climate policy, utility regulation, energy efficiency, and renewable energy programs. In addition to this work, he has participated in the creation and design of the Regional Greenhouse Gas Initiative, and he continues to advocate for programs to address global warming.

Prior to joining NRDC, he was a special aide to the president of the Environmental Quality Board in Puerto Rico. During that time he also served as legislative director for the agency and as special counsel for the environmental cleanup of Vieques and Culebra Island.

Martinez is a member of the executive committee of the New York State Bar Association's Environmental Law Section and co-chair of the Environmental Justice Committee.

A graduate of Tulane Law School, he received a BA in environmental policy and behavior from the University of Michigan.

Véronique Bugnion, PhD

Point Carbon
e-mail | web site

A specialist in energy and environmental markets, Veronique Bugnion has focused on analyzing and modeling the U.S. energy markets, particularly the deregulated power, natural gas, and emissions markets, and assessing the impacts on corporations and markets of developments in climate change policy.

Currently a director of Point Carbon and head of research for North America, Bugnion is responsible for research, analysis, and product development. Before joining Point Carbon in 2006, she conducted energy research and implemented analytical trading strategies in the commodities futures markets for Two Sigma Investments, LLC. As president of cipheRisk, Inc., she developed investment strategies for energy markets. As vice president of Constellation Power Source she designed and built a weather derivatives trading platform; co-developed a next-generation, enterprise-wide risk management system; designed and implemented short- and long-term, weather-driven, demand forecasts for electricity and natural gas; and developed corporate strategies for the U.S. SO2 and NOX emissions markets. As an associate with Goldman Sachs, Bugnion structured a bond issue, Mediterranean Re, covering windstorm and earthquake related damages, for a European reinsurer.

She has a strong publications record in the areas of climate modeling and U.S. climate change policy.

Bugnion holds a PhD in climate physics and chemistry and a master of science degree in Technology and Policy from the Massachusetts Institute of Technology.

Christine Van Lenten


Christine Van Lenten is a freelance writer who has written about varied subjects for the Academy. She has also written about public policy issues and technical and scientific subjects—many of them in the environmental field—for federal and state agencies, nonprofit organizations, and private sector firms.