THE CARBON MARKET is growing in size and sophistication but regulators are in danger of causing serious damage to the thriving market they have created. The European Commission’s threat to limit emission credits in the EU Emissions Trading Scheme (ETS) after 2012 threatens the billions being invested in Clean Development Mechanism (CDM) projects, and repeated delays to the creation of central elements of the market’s infrastructure raise the spectre that traded contracts could fail to settle in December, exposing counterparties to a settlement risk of hundreds of millions of euros.
At a carbon markets conference organized by consultancy Point Carbon in Copenhagen in March, speakers included a Nobel Prize laureate, a prime minister, a minister of the environment and some chief executives, but for the delegates the speaker with the most sought after views was without a doubt Yvon Slingenberg, head of the C2 directorate of the European Commission (which covers market-based instruments including greenhouse gas trading), sent at the last minute to speak on behalf of her boss, who couldn’t make it.