Carbon Trading: Current Situation and Oversight Considerations for Policymakers Page: 1 of 46
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Accountability * Integrity * Reliability
August 19, 2010
The Honorable Darrell Issa
Committee on Oversight and Government Reform
House of Representatives
Subject: Carbon Trading: Current Situation and Oversight Considerations for
Dear Mr. Issa:
This letter transmits to you our briefing slides in response to your request concerning carbon
trading in the United Sates and various design and implementation issues to be considered in
discussions about a possible national carbon trading program. Industrial activities in the
United States emit significant amounts of carbon dioxide and other greenhouse gases each
year, substantially affecting the earth's climate, according to the National Academy of
Sciences. In an effort to reduce these emissions, some have suggested capping emissions and
allowing them to be traded in secondary markets just as other commodities are traded. We
briefed your committee staff on the results of our work on July 23, 2010. Specifically, we
provided information on (1) carbon-related products currently traded in the United States
and the extent of trading; (2) risks and challenges posed by these products; (3) the extent to
which and how these products are regulated; and (4) issues that market observers identified
for policymaker consideration as part of creating a national cap-and-trade carbon market.
The attached briefing slides were updated to reflect additional information as discussed
during the briefing, including how carbon products are also subject to political and regulatory
risk and how they are treated under laws applicable to transactions in commodities.
We reviewed publicly available reports, congressional testimonies, and federal laws; reports
from GAO, Congressional Research Service, and the Congressional Budget Office; studies and
reports from several professional associations, World Bank, and academics; and information
from, among others, the Commodity Futures Trading Commission (CFTC), Chicago Climate
Exchange, Chicago Climate Futures Exchange, New York Mercantile Exchange (NYMEX), and
European Climate Exchange. We also met with knowledgeable staff at CFTC and the U.K.
Financial Services Authority, industry associations, U.S. and European exchanges, a carbon
emitter, financial institution, and academics known as experts on carbon trading.
We conducted this performance audit from April 2010 to August 2010, in accordance with
generally accepted government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions based on our audit
GAO-10-851R Carbon Trading
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United States. Government Accountability Office. Carbon Trading: Current Situation and Oversight Considerations for Policymakers, text, August 19, 2010; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc298912/m1/1/: accessed December 18, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.