Though there is a continued interest in direct emission reduction by polluters, with the establishment of a mandatory offset market under the Kyoto Protocol, today there is great deal of focus on carbon markets. The mandatory market is further augmented by the innovative developments in the voluntary carbon market. The ILO programmes focusing on small and medium enterprise development and employment creation, in particular, may want to explore the development of the carbon market, its players, its standards and its financial flows. In this context, there may be an opportunity to identify ways in which enterprise development and employment creation can be enhanced by economic activity within the carbon market.
The World Bank's 2007 report on the carbon market explains that: "The carbon market grew in value to an estimated US$30 billion in 2006 (€23 billion), three times greater than the previous year. The market was dominated by the sale and re-sale of European Union Allowances (EUAs) at a value of nearly $25 billion under the EU ETS (€19 billion). Project-based activities primarily through the Clean Development Mechanism (CDM) and Joint Implementation (JI) grew sharply to a value of about US$5 billion in 2006 (€3.8 billion). The voluntary market for reductions by corporations and individuals also grew strongly to an estimated US$100 million in 2006 (€80 million)."
The report also highlights the serious challenges facing both the regulated or mandatory markets and the unregulated or voluntary markets: "In the emerging fragmented carbon marketplace, efforts to mitigate carbon are multiplying in both the regulated and the unregulated sectors. "For regulated markets, emissions trading can help achieve a given level of emission caps efficiently by setting an appropriate price, but this requires that policymakers set the caps consistent with the desired – and scientifically credible – level of environmental performance. ...
"Markets can, to a certain extent, accommodate the appetite that individuals and companies in Europe, Japan, North America, Australia and beyond have for carbon emission reductions that go well beyond what their law makers require of them. This high-potential voluntary segment, however, lacks a generally acceptable standard, which remains a significant reputation risk not only to its own prospects, but also to the rest of the market, including the segments of regulated emissions trading and project offsets."
(emphasis added)
In short, though there are many challenges facing the carbon market, there are now real opportunities for enterprises from developing countries. Opportunities exist both in the mandatory markets, particularly under the Clean Development Mechanism of the UNFCCC's Kyoto Protocol. They also exist in the among the myriad of carbon brokers operating in the voluntary markets. A major challenge facing enterprise development and employment creation in developing countries is to identify carbon offset export opportunities in both the mandatory carbon market and the voluntary carbon market.
More on carbon markets ....  Carbon Markets (Ecosystem Marketplace, 2006)
A concise two-page overview.
State and trends of the carbon market 2007 (World Bank)
Released at the Carbon Expo 2007 in May in Cologne, this report provides one of the best overviews of the carbon market today. For example, though the developing world is now a major player, the report shows how carbon offset exports from the developing world are dominated by China (60%) and India (12%). The international carbon reduction market (Green Markets, 2006)
An introductory PowerPoint presentation of the carbon markets Understanding the carbon market (CarbonNetural Company, 2007)
A detailed PowerPoint overview of the regulated and voluntary carbon markets. Guide to the carbon market (TNC, 2007)
A guide for conservationists with a focus on developing countries produced by The Nature Conservancy, one of the largest conservation NGOs.
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