|
|
| Home » Carbon trading » Voluntary carbon offset market in the United States |
|
Voluntary carbon offset market in the United States |
|
Voluntary carbon offset market in the United States started developing in the 1990s. In 1989, American electricity company, AES Corporation, brokered the first carbon offset deal in the world. The voluntary market unlike regulated markets does not depend on legally designated reductions to create demand.
The absence of regulations leads to fragmentation and incomplete information. The fragmentation of carbon offset market is caused by case-to-case deals many of which do not require certification or verification. Absence of registration with any central authority is also a characteristic of this voluntary market. Thus, the voluntary market involves trading in a number of products adhering to different standards.
Absence of registration regulation, transparency and uniformity has prompted environmentalists to term the voluntary market more as a game of smoke than an exercise in environment control. Many buyers are also apprehensive about the non-delivery of materials, a common feature of voluntary carbon offset market. The lack of any form of a regulatory driver results in irregular demand.
In spite of its drawbacks the voluntary carbon offset market is emerging fast compared to regulated market. The products traded in a voluntary market are innovative and can be put to multiple uses. The flexible nature of certain carbon offsets lowers transaction costs and hence benefits suppliers.
Voluntary carbon markets reduce transaction costs and avoid clean development mechanism (CDM) costs. Products sold through voluntary carbon offset markets are financed easily as CDM approvals are not essential as in the case of products sold through regular markets.
Put briefly, lower transaction costs, flexibility and innovation characterizes voluntary carbon offset market in United States. It benefits both suppliers and buyers. The estimated volume of carbon offset sold through the voluntary market amounted to approximately 100 million tons in 2007.
|
|
|
|
|
|