June 25, 2008 / 2:33 PM / 10 years ago

CFTC's Chilton to say carbon markets will soar

NEW YORK (Reuters) - A commissioner of the U.S. commodity futures regulation agency was due to say on Wednesday that greenhouse gas emissions markets could become the largest commodity market.

“Even with conservative assumptions, this could be a $2 trillion futures market in relatively short order,” Bart Chilton, a commissioner of the Commodities Futures Trading Commission, said in a statement ahead of an appearance in New York at the Finance IQ carbon trade conference.

Bart extrapolated the number from a projected $200 billion value for cash emissions trade in the United States, which is historically the world’s largest greenhouse gas polluter. Futures markets are typically 10 times the volume of cash markets.

The United States has only small voluntary carbon markets at the moment. But both U.S. presidential candidates support prompt regulation of the gases blamed for warming the planet to encourage cutting emissions with markets.

“We are about to see a major change,” Chilton said in a copy of his speech obtained by Reuters. “Environmental stewardship can be a business driver that fuels the economic engine of our democracy.”

Many U.S. companies are already losing business in Europe as their counterparts there “become leaner and more competitive,” as they participate in the Kyoto Protocol, which requires industrial countries to cut emissions, the speech said.

President George W. Bush withdrew the United States from the Kyoto pact early in his first term. He said it would hurt the economy and unfairly leave rapidly growing China and India without regulations.

“The United States not being involved in Kyoto is actually hurting parts of the U.S. economy,” Chilton’s speech said.

The main U.S. climate change bill that would regulate the gases died in the Senate this month.

Chilton will say he would be surprised a year from now if new climate legislation had not been approved by Congress and supported by the next president.

Chilton’s speech said that a $2 trillion carbon market would represent the equivalent of 60 million to 180 million futures contracts.

In 2007, light sweet crude oil trade on the New York Mercantile Exchange amounted to 120 million contracts and natural gas had an annual volume of 30 million contracts.

Reporting by Timothy Gardner

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