The environment has been a hot topic recently, and carbon emissions credits trading in particular. Companies that are energy efficient can build up an over-supply of credits, which they can then trade to organisations that produce a lot of carbon emissions. This has the potential to create a range of financial instruments based on the trading of credits.
There are signs that a carbon credit scheme could be successful in the Middle East, particularly within energy-producing countries. In the UAE, Masdar, an initiative by the Abu Dhabi Government to promote advanced energy and sustainability, recently signed an agreement with Dubai Aluminium Company Limited (DUBAL) to develop and register a project under the Clean Development Mechanism (CDM) of the Kyoto Protocol which will reduce greenhouse gas emissions associated with aluminium smelting.
The CDM project, which is one of the first of its kind in the Middle East, aims to monetise greenhouse gas emission reductions resulting from DUBAL's improved processes at its existing aluminium smelter at Jebel Ali. This could eventually see emission reductions being turned into tradable carbon credits.
Steve McMillan, CEO of IMEX (International Mercantile Exchange), is enthusiastic about the prospects for carbon trading.
"I think it's a massive opportunity for the region," he says. "Carbon emissions opportunities in the Middle East are dramatic. Energy production in itself obviously creates opportunities to create carbon emissions reduction schemes and various other opportunities.
"I think it's a massive opportunity for the region and I'd like to think we'll be involved in trading."The carbon credit scheme is relatively new, and in Europe the financial industry is still considering how best to create derivatives from it....
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