Life after Kyoto
The world’s carbon market in 2013?
The 1997 signing of the Kyoto Protocol was a landmark global achievement in dealing with what many in the scientific community believe is the world’s most urgent environmental problem — greenhouse gases (GHGs). Not only did the Kyoto Protocol impose the first cap on GHGs, it also created one of the world’s largest commodity markets: a $140-billion GHG emissions trading forum. By putting a price on carbon the Kyoto Protocol gave companies for the first time the motivation to look at GHG management, to invest in new technology and to accelerate the move to a low-carbon economy.
The “world of Kyoto” is about to get a good deal more complex. Although the Kyoto agreement is expected to be extended past 2012 (its original expiration date) several noted countries, including Russia, Canada and Japan will drop out and pursue their own national or regional policies. The post-Kyoto world is expected to continue to be complicated and constantly evolving, with a globally unified carbon market at least years, if not decades, away. During this period, tremendous uncertainty will likely continue over exactly how GHG programs will be structured.
Companies that are informed and prepared will have an advantage, both for mitigating compliance risks and for taking advantage of the upside opportunities in an ever more fragmented carbon market. This paper provides an overview on where matters stand today and generally what might be expected over the coming months and years as these complex matters find stability.