NEW YORK -- Preparing for an eventual deal between the United States and China that would link their future carbon markets through imports of offsets into a U.S. cap-and-trade program, one of Europe's largest carbon exchanges is moving to set itself up as the platform of choice for trading in that future market.

Paris-based BlueNext announced late last night that it had reached a new agreement with the China-Beijing Environmental Exchange (CBEEX) to link their databases of Certified Emission Reductions (CERs), international offsets that are issued by the U.N. Clean Development Mechanism.

Under the terms of the new deal, BlueNext will advise CBEEX on how to develop its budding CER market, while the Chinese exchange will open up its large storehouse of CDM project information to BlueNext. The agreement marks the latest move toward what BlueNext CEO Serge Harry called "our long-held ambition to be the reference point for a single international price for carbon," in much the same way that the New York Mercantile Exchange serves as a reference for oil prices.

But coming on the heels of BlueNext's announcement that it would soon expand from its Paris base to set up shop on Wall Street, the deal with CBEEX could have more long-term strategic importance.

BlueNext, home to some 93 percent of spot trading of emission allowances and offset credits in Europe, is mostly owned by the New York Stock Exchange. And though the information and database sharing agreement should immediately have an impact on European trading, the two companies seem more interested in what it could do to tie the United States and China together in a post-Kyoto Protocol carbon market architecture.

China sells CERs, Europe buys

"NYSE's BlueNext, as an American-European company, is ideally placed to open up access to the largest buyers of CDM projects and CERs in the European and American markets," CBEEX said in a release. To date, more than 44 percent of all Certified Emission Reductions have been generated from greenhouse gas abatement projects in China, with most being sold into Europe's compulsory carbon market.

BlueNext's own public relations team also emphasized the potential for a "Chinese-U.S. exchange providing daily trades covering over 63 per cent of the $2.2 billion global market for carbon offsets," ahead of what the deal means for the European Union's Emission Trading Scheme.

Still, BlueNext marketing director Keiron Allen cautioned against viewing the new agreement with Chinese emission traders as a move in advance of U.S. federal cap-and-trade legislation.

"This should not be looked at as a strategic move ahead of a federal cap-and-trade bill, but a strategic move that will, in the future, create a strong backbone of trade between the three largest carbon emission centers: the U.S., China and Europe," Allen explained. "NYSE's BlueNext is well-placed to create the most liquid international trading system for this, as a result."

Though Chinese officials refuse to accept binding limitations on greenhouse gas emissions, they have demonstrated interest in building a carbon market in China, primarily based on trading in CDM credits. China doesn't have the regulatory system in place to handle large-volume emissions trading, nor is an exchange even necessary to trade CERs in the People's Republic, but BlueNext views this venture as laying the groundwork for when that time comes.

"If we look at it in a very simple way, there is a natural barrier for the facilitation of CER trading between China and the U.S. -- the time difference," Allen said. "BlueNext can help bridge this, as we sit in the middle, at the center of Europe."

A scramble for tomorrow's trade actions

Yesterday's move represents the latest in a string of increasingly competitive actions by a variety of commodities exchanges, including BlueNext, the Chicago Climate Exchange, CME Group, and Worcester, Mass.-based World Energy Solutions, to stake a claim to the burgeoning world of greenhouse gas trading. Experts believe a U.S. cap-and-trade system will likely become the world's largest carbon market, possibly dwarfing even Europe's robust emissions trading system.

CME Group -- owner of NYMEX and the Chicago Board of Trade -- announced yesterday that it will introduce next week four new futures and options contracts for E.U. allowances, the world's most heavily traded carbon allowances, and CERs. The contracts will be listed for trading under the Green Exchange venture, which was set up by NYMEX officials just prior to its acquisition by CME Group.

The Chicago Climate Exchange (CCX), viewed by many as a pioneer in the U.S. carbon market, already has an affiliation with China's Tianjin Climate Exchange and has set up joint ventures in Canada and Europe. On Tuesday, CCX announced new agreements with South Korean energy and commodity exchanges to lay the groundwork for a carbon market in that country.