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Independent third-parties should alsoundertake in periodic verifications ofemission reductions realized.• Measurable – The reduction should bemeasured using accepted methodologies.After measurement, the offset credit mustonly be counted once and then retiredthrough a credible registry system.Carbon projects developed today in a mannerconsistent with expected federal US standardswill have the best chance of future recognitionand value.Josh Green, CEO of the Verdeo Group, predicts that nocompliance for carbon projects will be required in the USuntil 2013. The Clean Air Act is unlikely to be used toregulate greenhouse gas emissions. However, new carbonprojects must be “over and above” existing regulations tobe eligible for credit. It appears that a significant percentageof allowances for these particular carbon projects willbe auctioned initially, and will continue to increase overtime. There will be set-asides for early action granted toprojects certified and registered using “best practice”standards. Finally, offset credits from a variety of sectorswill be allowed to lower the cost of compliance.There is a forecast of growth in carbon markettrading.Zimmer described that most of current global carbonmarket has come from nitrous oxides, HFC-23 refrigerants,captured in industry. They have higher value andlower costs of recovery. These waste gas recovery projects(75% of total credits traded) will decline to 25% of totaltrading value by 2012, according to New Energy Finance.Their costs of recovery are at $1.30, while renewableenergy and efficiency costs range from $6.50 to $20 forcomparable reductions. There has been an increasedpatent activity for clean technology and carbon tradingtools and administration. The US leads with largestnumber of renewable energy patents followed by Japanand Australia. Financial sector difficulties will meantightening credit markets. With growing environmentalconcern, it is likely that a shift will occur from waste gasrecovery and this movement to a clean technology basewill favor renewables.The transition to a low-carbon economy is astrategic process.An emissions trading system is an essential, yet insufficient,policy tool on its own in accelerating the transitiontowards a low-carbon economy. This is true for three mainreasons. First, given the urgency of climate change andthe combination of policy objectives governments aretrying to achieve (i.e. technology leadership, energysecurity, local air quality); a spectrum of measures will berequired. Second, not all sectors respond well to carbonpricing. Third, still in early days, it remains to be seen ifcarbon trading strategies will be fully successful inencouraging new investment. The precise program detailscan significantly influence the results, in terms of pricesthat customers have to pay, investment decisions andactual abatement achieved (lessons from Europe).Carbonprices are determined, influenced and formed by the threekey factors of fundamentals, design and behavior.Certain risks become apparent with anAmerican cap and trade system.The following risks make implementing cap andtrade legislation in the United States difficult:• Regulatory risks, such as project approval,validation, and verification of emissionsreductionprojects.• Political risks, that could alter climate changepolicies and obligations, such as host-countryinstability, expropriation of credits, contractfrustration, credit confiscation, failedvalidation, and more.• Technology-performance risks, timing of capgoals with technology availability.• Carbon-financing risks, including an inabilityto secure or maintain financing based onprojected or volatile carbon-revenue streams.Credit value once received for carbon is atrisk of market flux.• Carbon-performance risks, associated withvariability in the generation, permanence, andownership of emissions reductions.• Counterparty credit risks, including the failureto deliver credits as contracted; and creditsupport for risk transfers.American Council On Renewable EnergyExecutive Summary Report 48