The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

What price global warming?

Banks and exchanges are working to expand their commodity-based products to capture new opportunities that will arise from the burgeoning European carbon dioxide emissions trading scheme. The use of Isda documents is already boosting trade volumes. And banks are starting to lend against allowances as collateral.

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 the companies directly affected by the scheme, financial market players have quickly been drawn in.

Energy market correlation

Part of the banks' motivation is to understand the CO2 market because of its impact on other commodities that they are already trading.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree