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C02 Emissions Market July 17, 2006

Posted by newyorkscot in Markets.

Interesting article on the growth of the carbon dioxide emissions market in Europe, and how the US market is a “Wild West” show waiting to happen. Seems like Europe’s attention to conforming to the Kyoto Protocol has driven the market forward while there has been a lack of regulations, and hence liquidity, in the US.

In this slightly bizarre marketplace, companies can trade emission allowances and offset credits, so if you are stinking up the joint, you can buy allowances to make it all cool !!! And if you are being a good citizen and taking carbon out of the atmosphere, you can sell your emission credits to the smelly guys…

I wonder what the correlation is between the CO2 emissions market and the weather derivatives market ..?



1. Luke Flemmer - July 18, 2006

I actually own a bunch of Carbon Credit Futures. The market got hammered recently when a number of European countries reported much lower than expected emissions. That is the one problem with this instrument – the supply of the underlying commodity can vary very widely, so it is subject to major price fluctuations. Still (barely) in the money though 🙂

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