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Derivatives Bill Calls For U.S. Carbon Market Study

Date: 23-Apr-10
Country: US
Author: Timothy Gardner and Roberta Rampton

A tough new proposal to regulate U.S. markets calls for top regulators and government officials to conduct a study on transparency in emerging U.S. carbon markets as part of the financial reform package.

The heads of the Treasury Department, the Commodity Futures Trading Commission and other U.S. agencies would be required to study oversight of existing and prospective carbon markets, according to the proposal, part of a bill passed by the Senate Agriculture Committee this week.

The goal of the study is "to ensure an efficient, secure, and transparent carbon market, including oversight of spot markets and derivative markets," the bill said.

Senator Blanche Lincoln's Agriculture Committee voted to advance the bill this week. It will be merged with the Senate Banking Committee's financial reform package, expected to be debated next week, which will likely include a crackdown on the unregulated $450 trillion derivatives market.

Emerging carbon markets are either voluntary or regional because the U.S. government does not limit emissions of gases blamed for warming the planet, considered a requirement before the launch of a national market.

Ten states in the U.S. Northeast operate a carbon market on power plants. In addition, the Chicago Climate Exchange also runs voluntary carbon markets.

Some critics of carbon markets say that not all of the credits that are traded in them represent true emissions reductions.

Senators John Kerry, a Democrat, Lindsey Graham, a Republican and Joe Lieberman, an independent, hope to unveil a climate bill on Monday that is expected to include a carbon market on power plants beginning in 2012, which could be expanded to the manufacturers years later.

Other agency officials required to participate in the study would be the heads of the Agriculture Department, the Securities and Exchange Commission, the Environmental Protection Agency, the Federal Energy Regulatory Commission, the Federal Trade Commission, and the Energy Information Administration, the independent statistics arm of the Department of Energy.

The interagency group would be required to submit a report to Congress on their study within six months after the report becomes law.

(Editing by Marguerita Choy)

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