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GAO-10-851R 1 (2010-08-19)

handle is hein.gao/gaobaanud0001 and id is 1 raw text is: i GA 0 _ A r t bilty IIntegrity * Reliability August 19, 2010 The Honorable Darrell Issa Ranking Member Committee on Oversight and Government Reform House of Representatives Subject: Carbon Trading: Current Situation and Oversight Considerations for Policymakers 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 objectives. GAO-10-851R Carbon Trading

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