From New Zealand to Japan, Jim Kharouf looks at the
development of the Asian carbon markets
Amid all the polluted political carbon dioxide blowing around
governments these days about energy and grain prices, it is
easy to lose sight of a global market emerging –
No doubt the real carbon market is concentrated in the
European Trading Scheme (ETS) but the latest push is coming
Just a few months ago it seemed as if very little was
percolating in this region. Now Japan, China and Hong Kong are
making a noise about plans to create cap-and-trade markets.
Australia and New Zealand are also well on their way to
creating their own trading systems, and a host of other
exchanges are developing carbon products implying that their
governments are making moves as well.
While these markets are still in the development stage, it
is worthwhile checking in to see where they are heading.
New Zealand appeared to be the lone pioneer in the region
just a short time ago, pushing its agenda to become the first
country to list all six greenhouse gases in its market. It also
plans to include forestry offsets in its carbon market, a
seminal move that is not part of other established markets.
New Zealand Stock Exchange created a separate exchange just
for greenhouse gases called TZ1, which will handle spot and
futures trading, and provides a carbon registry. The goal for
the New Zealand government is to pass its legislation this year
and get its carbon market up and running soon after.
Australia jumped into carbon with both feet when its prime
minister, Kevin Rudd, recently signed up the country to the
Kyoto Treaty. This pushed the carbon cap-and-trade model far
ahead of that which his predecessor, John Howard, grudgingly
began. The goal is to complete the emissions market design by
the end of the year, pass the legislation by mid-2009 and start
trading no later than 2010. A final emissions trading scheme
report is scheduled for September.
At least two Australian exchanges are ready to offer
emissions contracts. Australian Securities Exchange is set to
offer futures on Aussie carbon, and it may compete with TZ1 as
well on New Zealand carbon. Its own internal estimates forecast
that the Australian market alone could grow to $100 billion
over the next decade.
Meanwhile, Sydney-based upstart Financial and Energy
Exchange plans to launch OTC and futures on carbon, other
greenhouse gases and energies. The exchange also plans to
launch the Sustainable Investment Market, a stock exchange for
clean technology and environmentally focused companies that is
the environmental equivalent of London Stock
Exchange’s Alternative Investment Market.
The Asian market got a boost in May when Japan and China
said they too were each developing carbon markets. China, the
world’s largest emitter of carbon, has not been
clear about its plans. However, Climate Exchange and PetroChina
have been closing in on a deal that could create the
country’s first emissions market. Chinese
officials and domestic media also have said that a new market
is in the works. How open that market will be is still unknown
but the potential is enormous. The Hong Kong Exchange also said
it was seeking a partner to link with on carbon.
In June Japan took major steps toward a cap-and-trade model
first with Tokyo Stock Exchange and then Tokyo Commodity
Exchange announcing cooperation on carbon contracts.
Japan’s prime minister, Yasuo Fukuda, then
announced his goal to reduce the country’s
emissions by between 60% and 80% by 2050 as part of his Cool
Earth Initiative. With a name like that, how can it not
Other markets are also looking to jump on board. Korea
Exchange, Singapore Exchange and Taiwan Futures Exchange have
also been developing carbon contracts, giving the commodity
Ultimately, the patchwork for the Asia carbon market is
beginning to firm up. Like other commodities, it will take some
time for the domestic markets to evolve and for linkages to
For a region that seemed lukewarm at first, it is showing a
sense of urgency and commitment to creating carbon markets.
There is less "if" being spoken and more "when".
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