Giant multinational corporations aren't often seen as saviors of the rain forest. But this past May an American environmental nonprofit called The Nature Conservancy persuaded General Motors to part with $10 million for rebuilding a Brazilian rain forest devastated by water-buffalo ranching. GM's money will ensure that trees are replanted, and that what remains of the forest is preserved. While GM says its main motivation for this project was to "restore and preserve" the rain forest, the company also had one eye on the fast-developing global market in tradable pollution allowances. If the market develops as both economists and business executives expect, the automaker could eventually receive credits for the carbon dioxide that the new forest will absorb over the next 40 years. GM might then be able to use those credits to offset some of its own CO2 emissions, allowing it to meet targets for reducing the greenhouse gases that most environmental scientists say are responsible for global warming.
Market-based incentives are not new to environmental policy. The U.S. Environmental Protection Agency sponsors a number of tradable permit systems, in areas from the sulfur-dioxide pollution that creates acid rain to the production of ozone-depleting chlorofluorocarbons. "The trade allowed many companies to hit their targets for sulfur-dioxide-emission reductions ahead of time and below cost," says David Doniger, policy director for the climate center at the Natural Resources Defense Council in Washington, D.C.
Now greenhouse-gas emissions are becoming a commodity that can be bought and sold on a worldwide scale, just like gold or soybeans. Rules governing such transactions aren't fully worked out yet. Nor is there any obvious international agency to regulate the trade and adjudicate disputes. The 178-nation Kyoto Protocol on global warming may provide a start, despite U.S. refusal to support the treaty. It will allow developed countries to meet targets by buying and selling credits. Economist Richard Sandor, who pioneered spot and futures markets in SO2 emissions for the Chicago Board of Trade, says that greenhouse-gas allowances will ultimately constitute "the biggest commodities market in the world."
Already the global energy broker Natsource estimates that 55 million tons of greenhouse gases have been traded since 1996 and that that market could expand to $200 billion within the next few years. "Whether or not the United States signs Kyoto, multinationals know they'll eventually have to deal with emissions caps in at least some of their territories," says Sandor, who currently brokers greenhouse-gas trades through his company, Environmental Financial Products. …