Copenhagen climate deal: London faces carbon trading challenge from New York

By Rowena Mason, City Reporter


Published: 12:02AM GMT 21 Dec 2009

Political leaders signed a watered-down agreement this weekend with no future
roadmap to international emissions trading.

However, President Barack Obama is likely to use the US's commitment to
lowering its emissions as a way of forcing his cap-and-trade bill through
the Senate in the spring.

Richard Gledhill, head of climate change at the accountancy firm, said the US
acceptance of the
Copenhagen Accord would "accelerate huge growth in the global
carbon market", possibly tripling its size over the next decade.

Trading in carbon markets has grown to £75bn since the EU Emissions Trading
System was launched in 2005 and London has emerged as the leading centre for
trading and investing in carbon.

"The big question now for the City is whether London will lose its
leadership in carbon markets to the US," Mr Gledhill said. "Banks,
brokers and investors have been gearing up in New York and Chicago since the
new administration took over. President Obama gave a clear message in his
speech to the Conference in Copenhagen – America is going to take action on
climate now. Lose this battle and we risk a financial sector brain drain
from the carbon markets in London."

The US could also be a more attractive place to trade carbon offsets, since
trading is limited under the EU system.

Under the current system, low-carbon projects in the developing world are
given credits which they can sell to companies that need to emit more carbon
dioxide.

Business groups, including the Institutional Investors Group on Climate
Change, reacted with disappointment that only the US has signalled its
intention to penalise heavy emitters through a trading system.

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