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Green CAT markets to be largest in the world, says CFTC


Green cap and trade markets that are currently trading on a voluntary basis in Chicago and New York could become the largest of all commodity markets, according to Commissioner Bart Chi

Green cap and trade markets that are currently trading on a voluntary basis in Chicago and New York could become the largest of all commodity markets, according to Commissioner Bart Chilton of the Commodity Futures Trading Commission.

Chiltern believes the passage of US federal legislation this year would have a positive and dramatic impact on markets, the economy and on the environment.
‘Globally, these environmental markets have already grown on average 329 per cent per year since 2002,’ says Chilton.
With the passage of legislation, such as H.R. 2454 introduced by Representatives Henry Waxman and Edward Markey, Chilton estimates green CAT markets could become USD2trn endeavors in five years.
President Barack Obama has been a leading influence on getting the legislation moving on Capitol Hill. He met with Waxman, Markey and other House members in April and urged that the bill be put on a fast track. The measure was approved by the House Energy and Commerce Committee, which Waxman chairs, before Memorial Day and is scheduled to be considered by the full US House of Representatives before the August District Work Period. Obama has said that he wants legislation to become law by the end of the year.
Currently the environmental trading of carbon emissions is done on a voluntary basis, but should the Waxman-Markey bill or similar legislation become law, carbon-emitting businesses will be required to limit their output in order to meet mandated emissions reductions.  If they cannot reduce below those levels, or caps, emitters will need to purchase allowances from others who have allowances to sell. 

The overall goal of the legislation would be to reduce US carbon emissions which cause global warming by 17 per cent (using 2005 as the constant base year) by 2020, and by 83 per cent by 2050. In order to achieve those levels, companies would trade allowances to ensure compliance. That trading would be done on regulated futures exchanges similar to futures trading for other commodities like oil, gasoline, agricultural commodities and metals.
As part of the green CAT markets legislation, Chilton says financial regulatory reform provisions are critically needed. 

"We don’t want to see the largest commodity markets in the world – these green CAT markets – become a private jungle gym for speculators and fraudsters," he says. "We need additional regulatory tools to protect consumers."

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