The American Clean Energy and Security Act (the Waxman-Markey Clean Energy Security Act) narrowly squeezed through the House in June and is now working its way through the Senate. Regardless of the outcome, carbon markets will be at the top of the agenda at the United Nations Climate Change Conference in Copenhagen this December, as governments discuss climate change measures, such as cap-and-trade, similar to the European Union Emission Trading Scheme. Meanwhile, the carbon-trading market is expected to double worldwide this year. The Obama administration has projected $646 billion in sales of emissions allowances or credits through 2019. And at least one major U.S. city has hired consultants and scheduled roundtables to map out a strategy on how best to build on the opportunity in carbon trading and related activities. While the requirements to hold allowances do not come into effect until 2012 under current federal proposals and not fully for a number of years thereafter, the development of cross-border carbon markets raises the question of what this means for businesses. In a white paper, Confronting the Carbon Challenge, Pat Concessi, global climate change leader for Deloitte, recently provided some answers. Here are some (but not all) the implications the report outlines.

Substantial incremental costs for entities in regulated carbon markets. Since the details of emissions trading programs are still evolving, understanding and projecting the costs for a given business means grappling with such uncertainties as determining the point of regulation, the industries to be included in trading and the options for offsetting. The ability to pass carbon costs to customers can determine the effect on profitability.

Business strategy. Companies may find it important to integrate the price of carbon into their overall strategy. Given the regulatory uncertainty, using scenarios can be important. These scenarios need to be internally consistent, recognizing the correlations among regulatory options, pace of technology implementation and resulting commodity prices. Strategies should incorporate related policies, such as low carbon fuel standards, renewable electricity standards and incentives for clean energy.