The cap-and-trade-emissions market has spawned a host of innovators who act as brokers and deal in carbon dioxide futures and derivatives
Armani-clad investment bankers usually don't get much credit for saving the world. But the success of Europe's thriving market in trading carbon emission credits highlights a major area of innovation there—and a rare instance where making money and helping the planet go hand in hand.
This is no feel-good charity scheme. Enticed by the possibility of high returns from the European Union's Emission Trading Scheme (EU ETS), financial institutions, including Barclays (BCS) and Morgan Stanley (MS), have flooded into the Continent's cap-and-trade carbon dioxide market (BusinessWeek.com, 11/1/06) since its creation in 2005. Now, an estimated $78.6 billion in carbon credits—the right to emit a specific amount of carbon dioxide—are traded annually on the EU ETS. And trades in other carbon-related financial products, such as derivatives and futures, are posting double-digit gains each year.
Helping to fuel the market's rapid expansion (BusinessWeek.com, 1/23/08) are a host of new products and services revolving around carbon trading. Perhaps no company has jumped on the opportunity more than Dutch startup European Climate Exchange (ECX), whose platform handles 85% of the 1.2 billion carbon emission trades made annually in Europe via exchanges. (An additional 800,000 or so carbon credits are traded bilaterally between companies, not via exchanges.) Now ECX is looking to expand into the fast-growing futures market....MORE