In Canada the dispute over a domestic carbon exchange, linked to the stock exchange, is between Quebec which supports Kyoto in order to get the carbon exchange to locate in Montreal, while the Conservatives refuse to play in the carbon market, disadvantaging the TSX.
While the Tories talk about Carbon credits going to Russia, the reality is that the carbon market is housed in the Chicago commodity exchange. It is a non starter when it comes to actually reducing green house gases. Instead of being some futuristic market it is a return to the state monopoly mercantilism of the 17th Century.
The carbon market is unique in that the commodity traded derives its value primarily from its ability to meet the requirements set by an environmental regulator. There is also a market for voluntary offsets to emissions, but this market is small and unlikely to ever represent a significant piece of the total carbon trading pie (the World Bank estimates (PDF document) that the EU ETS, the only regulations-based emissions trading market in the world, accounted for 99% of total market value in 2006).
The problem with this is that governments have a long history of messing things up when they get involved in any industry. For instance, in Europe, the market for phase one emission allowances took a massive hit after it became clear that EU governments had over-allocated emissions to shield their national industries from the full effects of strict emissions caps. Besides effectively neutralizing the economic incentive to innovate and reduce emissions, this seriously shook the market's confidence in the ability of governments to uphold the necessary conditions for an effective and efficient carbon market to develop.
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