Thursday, April 3, 2008

The Emissions Trading Market: Risks and Opportunities

From Britain's Financial Services Authority is here.
The HT goes to the Telegraph, who write:
...The Financial Services Authority also cautioned that the fast-growing market in carbon dioxide emissions poses risks that could harm other commodities markets such as gas and electricity....

The FSA says:
...The key differences in the emissions market, compared with other commodities markets, are that it is a politically-generated and managed market and that the underlying is a dematerialised allowance certificate, as opposed to a physical commodity....

We've been licking our chops at the prospect of trading derivatives priced off structured products composed of sworn statements as to the absence of an invisible gas for a while now.