There is a gold rush of sorts; only it's not in the hills, but in the sky.
It is a global concern - scientists increasingly say our planet is heating up largely because of /*carbon dioxide emissions*/.
Now, many governments around the world are looking for ways to reduce a source of that warming, and California may be one of the biggest players.
"Governments have a choice they can do two things. They can regulate things, or they can create a market that will try and find efficiencies in the reduction of a particular pollutant," said Ricardo Bayon from Ecosystem Marketplace.
Bayon is a carbon market industry analyst in Mill Valley.
"What's happened is that governments all over the world have found that markets may be a better way of achieving regulatory ends than the standard tax or command and control approach to regulation," said Bayon.
So called "cap and trade" markets are designed to reduce pollution.
Here's how a market works: the government issues permits to industries that pollute; capping them at a certain level based on environmental regulations.
Each of those permits allows those industries to emit a certain amount of carbon dioxide into the air.
Companies that emit less than their allowance can sell their leftover permits to brokers, who then sell to companies who exceed their pollution cap.
Investment banks, hedge funds and investors then speculate on the value of those leftover permits and trade them on an open market -- much like trading gold or oil.
Permits representing as much as 20 million tons of carbon dioxide offsets were traded last year.
"The regulated markets are now huge. In Europe, the regulated markets transact about 40 billion euros, so that's almost $60 billion," said Bayon.
In 2006, the state legislature approved the /*California Global Warming Solutions Act*/. It calls for a dramatic reduction in greenhouse gas emission by 2020.
"It commits California to emissions reductions. Now those emissions reductions are quite drastic, and there is no way the state's going to do that unless the state finds creative ways of reducing greenhouse gases and the market is one way," said Bayon.
The Air Resources Board will ultimately decide whether the state will use a cap and trade system.
"It's definitely under consideration," said Mary Nichols from the Air Resources Board.
Nichols chairs the board. She says her agency is looking at all the options including more regulation and even a tax on emissions to meet the 2020 goal.
"Some type of market is the mechanism that almost everybody who's looked at the carbon situation has said has to be used because carbon is so pervasive in our society, that you can't pass enough regulation to deal with it in every one of its aspects," said Nichols.
The /*Air Resources Board*/ will unveil a list of options next Monday. Not everyone thinks a cap and trade marketplace is the way to go.
"We want an accountable, publicly responsible trading mechanism," said State Senator Christine Kehoe (D) San Diego.
Kehoe is among those who think the state is putting the cart before the horse. She worries that big polluters will simply buy up credits and never reduce their emissions.
"The question is, by trading carbon back and forth really the ability to pollute, are we going to bring down our greenhouse gas emissions fast enough and are the big polluters truly going to make the improvements they need to clean up," said Sen. Kehoe.
Kehoe says more regulation is needed to ensure carbon reductions will be made before any market is created.
But the /*California Manufacturers & Technology Association*/ says more regulation will only mean higher prices for consumers, because companies will be forced to spend more money to reduce their pollution.
Instead, the CMTA favors a cap and trade market, saying it will stimulate the economy by developing pollution reducing technologies.
"We think that the economy is the best place to find a solution. Governments have plenty of work to do, they don't need to be deciding how every company complies with the reduction requirements," said Dorothy Rothrock from the CMTA.
Broker and investment firms from around the world are banking on the creation of a California "cap and trade" market, and they are setting up shop in San Francisco.
"California has really been a leader in this area," said Michelle Passero from EcoSecurities.
EcoSecurities from Ireland is convinced The Bay Area is "the" place to be.
"San Francisco is certainly a breeding ground for innovation and entrepreneurs. There is a lot of activity happening now in Sacramento, so it's a great proximity," said Passero.
Financial services giant Cantor Fitzgerald spun off its environmental trading last March, creating Cantor CO2e. It's eyeing the cap and trade market and looking beyond it.
"You can bring your emissions down from here to here on site, but you still have this much carbon. If truly want to go green, you are going to be looking for other projects," said Josh Margolis from Cantor CO2e.
We should know by the end of the year whether California finds gold in carbon markets.
"It's big, it's as much as core commodities or other things. There are people who think that carbon will actually be the world's biggest commodity inside 20 years," said Bayon.
Wednesday on ABC7 News at 6pm: who's watching out for you when you buy carbon offsets? Is reducing your carbon footprint all smoke and hot air?
Written and produced by Ken Miguel.