I told you a few weeks ago that the world greenhouse gas credits market grew 80% last year. But for an industry that now has a $60 billion price tag, we haven't really been hearing too much about it.

The last week, however, has provided some insights about where the industry is heading and how investors like you can position themselves to get a piece of it. Here are the most recent carbon market developments concerning the international and domestic spheres.

Binding U.S. Emissions Targets

Though there was no mention of it on domestic news outlets, James Connaughton and Daniel Price, environmental and economic advisors to President Bush, said in Paris yesterday that the U.S. is ready to approve "binding international obligations" for reducing emissions.

In case you didn't know, we've been obnoxiously opposed to any kind of binding targets--like the Kyoto Protocol--until now.

Of course, U.S. acceptance of binding targets still comes with the caveat that developing nations share at least part of the ‘burden'.

And while getting developing nations to commit to binding emissions reductions has proven politically difficult in the past, the U.S. seems willing to jump in even if those countries make a lesser commitment.

According to Philip Clapp, deputy managing director of the Pew Environment Group, "The White House knows that taking a binding target of comparable size [to that taken by the US or EU] is neither a negotiating option nor a physical possibility for the Chinese government."

Hey, it's a start. But no matter which direction the rhetoric takes, most industry insiders see a regulated U.S. market no later than 2012. I agree.

Carbon Market News from Down Under

Yesterday, Green Chip International Editor Sam Hopkins revealed the coming Australian energy IPO of carbon credit dealer GreenAir.

Undoubtedly, the possibility of an Australian carbon market stems from the recent election of the Labor party's Kevin Rudd to Prime Minister. As part of his campaign he promised to reduce Australia's emissions 60% by 2050.

Plans are already underway to initiate a cap-and-trade system to help reach that goal, but some warn that more needs to be done. More and more, we're seeing calls for emissions reductions by 2020, instead of seemingly distant 2050.

That is increasingly the case in Europe as well.

Nonetheless, an infant carbon market in Australia has been valued anywhere from $4 to $9 billion, and would provide "extraordinary returns" to those who finance, trade and structure the carbon market, according to the head of the Australian Nuclear Science and Technology Group.

The addition of the U.S. and Australia would obviously be a boon to the international carbon market.

Cap and Trade in Japan

Tokyo, too, is on the verge of abandoning a voluntary emissions system in favor a mandatory cap-and-trade scheme.

Japan has been under increasing pressure from the international community to cap its emissions, but has only recently pursued the idea. Now, Ministry of Economy, Trade and Industry is seriously studying the issue, and a system could be in place as early as 2013.

The country has been lagging in its commitments to reduce emissions per the Kyoto Protocol--a treaty that was negotiated in Japan. And many feel the country needs to get its act together before it hosts the Group of Eight (G8) summit this July.

Tsuneo Takahashi, Japanese director for US emissions asset management firm Natsource, says, "Japan is hosting the G8 this July, and has to be the leader of this summit. So I think at least a cap and trade system or some kind of market system will have to be adapted by the Japanese government."

In any case, all three countries'--the U.S., Australia and Japan--carbon futures rely on the successful negotiation of a successor to the Kyoto Protocol, which expires in 2012. We'll have to keep an eye on that scenario as it develops.

In the meantime, it may be wise to buy into a few of the companies that will surely reap the benefits of mandated carbon reductions and cap-and-trade systems. Companies that transform any type of waste gas into something useful are sure bets.

I'm thinking, of course, of companies like Waste Management, Inc. (NYSE: WMI), Covanta Holding Corporation (NYSE: CVA) and Environmental Power Corporation (NASDAQ: EPG).

We'll also be watching companies that produce energy without burning fossil fuels and companies that reduce emissions at the source. More on that in the coming weeks.

Until next time,

Nick

www.greenchipstocks.com

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