Pollution Permits Burn European Consumers; E.ON Gains (Update2)

So-called carbon permits, created to reduce dependence on coal and oil, boosted nuclear plant earnings for E.ON AG, Germany's largest power producer, and Finland's Fortum Oyj. Companies from steelmaker Arcelor Mittal to industrial gas maker Air Liquide SA face electricity prices that doubled since 2004, a year before the emissions program.

``Clean energy doesn't come cheap,'' said Francisco Blanch, the head of global commodities research at Merrill Lynch & Co. in London. ``If you want to reduce emissions, you are going to have to pay for more expensive power.''

Banks and brokerages generated as much as $12 billion in revenue from trading energy and commodities in 2006, said Ethan Ravage, a San Francisco-based consultant for the financial services industry. Banks don't disclose profits from emissions trading specifically. ``The gold rush is not over'' for emissions traders, he said by telephone.

Goldman Sachs, the world's largest securities firm, in less than a year profited more than fourfold from a 10.1 percent investment in Isle of Man, U.K.-based Climate Exchange Plc, which owns the ECX and an exchange in Chicago. The firm paid 12.3 million pounds ($24.3 million) in September 2006 for a stake valued at 69.9 million pounds on the London Stock Exchange.

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From Bloomberg