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I guess everyone knows by now what I think of the idea that Wall Street is going to turn the emissions trading market into the next trillion dollar bubble.  Basically, it seems like about #178 on the list of problems we should be worried about.  But aside from the fundamentals of the thing, one of the reasons I feel this way is that Waxman-Markey has regulation of the carbon market built in.  So what’s to worry about?  Here’s an update from worrier-in-chief Rachel Morris:

Well, Waxman-Markey had some good language regulating carbon and other energy derivatives….However, in the 300 pages of amendments added to Waxman-Markey just after 3.a.m on the night the bill passed, a few new sentences materialized that placed a big asterisk on those safeguards. The final text now says that the sections of the bill regulating carbon derivatives will be overridden by any derivatives legislation that the House passes later in the year.

Hmmm.  Still, that might not be so bad.  In fact, treating carbon emissions just like any other commodity, and then tightening up the entire market, might not be such a bad thing. Unless, of course, derivatives regulation gets captured by Wall Street shills like Rep. Michael McMahon of Staten Island.  Which, um, it turns out is in the process of happening:

McMahon, Bean and other New Democrats released their proposal for derivatives reform on Wednesday….Their bill would provide regulators with more information about derivatives than they have now, and it would establish an office in the Treasury for oversight of those instruments. But — similar to the proposal advanced by the Obama administration earlier in the year — it only requires standardized derivatives to be cleared, not exchange-traded, and calls for OTC derivatives to be reported to a trade repository, which is far less transparent than an exchange. Their provisions intended to prevent harmful speculation and market manipulation are also less explicit than those offered by Stupak.

Rachel has more in her piece, and it’s not all bad news.  There are competing proposals that would be considerably tougher than McMahon’s.  What’s more, there are still some fundamental reasons to think that carbon trading isn’t likely to be a huge gold rush. Still, this is obviously worth keeping an eye on.  There’s really no legitimate reason to oppose fairly stringent regulation of carbon emission trading, and anyone who suggests otherwise should be given a very skeptical hearing indeed.

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