Trading activity picks up for carbon financial instruments (CFIs) after the release of President Obama’s budget. Even though the budget does not include revenue from carbon allowances until 2012, future contracts prior to this date moved higher. Some people believe these instruments can be used as early action credits in a federal cap and trade system.
Between 2012 and 2020, nearly $645 billion could be raised from the sale of emission allowances, the budget outline says.
According to Point Carbon (subscription) estimates, that would assume around 80 per cent of the economy would face caps on their greenhouse gas output starting 2012 at 2005 levels, or roughly 7.2 billion tonnes of carbon dioxide equivalent.
This means the budget is banking on carbon prices of nearly $13.70 per tonne by 2012.With the cap declining around 2 per cent per year after 2012, Point Carbon estimates the price of carbon in 2020 would go up to $16.5 per allowance.