China could become the world's largest market for environmental products, predicted Chicago Climate Exchange founder Richard Sandor today.
At present, the carbon market is best-developed in Europe, where the highest volumes are traded in forwards rather than spot prices. But panellists at the Asian Financial Forum (AFF) in Hong Kong today also expressed hope for the future of the Chinese carbon cap and trade scheme.
As nations get wealthier, they tend to see growing environmental awareness and environmental spending, Sandor told the AFF. He said he was impressed by the high level of interest he received about carbon trading as his company set up in China. "I thoroughly believe China can become the pre-eminent market for trading emissions of air and water, and can substantially improve not only the quality of its life but the quality of the planet's life," he said.
Sandor predicted that, following the commoditisation of interest rates of mortgages and other assets in the 1980s, and data industries such as the internet and the birth of social networking in the 1990s, environmental goods would be the next to become profitable products.
"The next wave of value creation will be the commoditisation of air and water, and [I] put forth that these will be the biggest commodities in the world, and that ultimately value propositions will be in anything that deals with the scarcity and quality of these two issues," Sandor said. "Carbon trading is not - unambiguously not - the commodity of the future, it is the commodity now."
Sandor believes carbon finance can be easier to make work in emerging economies, depending on how the countries "set the glide path". He added that there are no legacy systems in places like China to hinder growth, as long as the country balances the need to grow with a market where entrepreneurs can develop solutions.