Cut down or buy up
FROM JANUARY 1 2005, the world's most ambitious programme for pollution control, worth potentially tens of billions of euros, will begin. Already banks, brokers, hedge funds and other traders are preparing to play, alongside end users such as power utilities and other corporations, in the European Emissions Trading Scheme (EU ETS). A substantial traded market in allowances is set to grow and policymakers hope that by putting a market value on reducing pollution, companies that clean up will be rewarded and those that do not will be confronted with clear direct costs.
Following the birth of this pan-European burden sharing agreement in October 2003, trading volumes of European Emission Allowances (EUA) quickly reached 500,000 tonnes in 2003 (each EUA is equal to one tonne of CO2) and have since risen to 6.3 million tonnes in the year to the end of November. Alongside...
