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June 05, 2006

Carbon Trading

Silly thought here. OK, maybe not entirely silly, but strange perhaps?

There’s various carbon offset schemes out there. You know, you pay some money, someone plants some trees (dubiously effective), gets low power light bulbs to someone, yadda yadda.

We’ve also now got the EU ETS, the carbon trading scheme under the Kyoto Treaty inside the EU. Doesn’t cover transport or personal (or housing etc etc) emissions, only power generation and industry (at least as far as I know).

Prices seem to be about 16/17 euro per tonne CO2.

At a very rough guess my  household emissions (no car, no heating or cooling, this is Portugal after all) are about 10 tonnes a year.

So, is it possible for me to wade into that market and buy 10 tonnes worth of emissions permits?   By doing so I would be covering my emissions, and also driving up the cost (however infinitessimally) for everyone else thus spurring  innovation in reducing such emissions.

Now, I can think of a few reasons why I might not be able to. Lot sizes might be much larger than my 10 tonnes. Commissions might be extremely high. Individuals may not be allowed to purchase on the exchange.

In fact, I can’t actually find an "exchange". I can find futures markets, places to speculate, but can’t actually find the terminal market.

But does anyone actually know? Is there a City type who actually knows all of this?


June 5, 2006 in Climate Change | Permalink


It's a dealer market unfortunately and you are correct that the unit size is much bigger than 10 tonnes.

Posted by: dsquared | Jun 5, 2006 11:29:49 AM

They're traded on a number of exchanges, though primarily as futures, such as the ICE (formerly IPE), Amsterdam ECX and the Nord Pool (for example click on CO2 allowances on the left http://www.nordpool.com/). Most of the market is still OTC based.

The ICE contract is 1000 tonnes, IIRC.

Posted by: Matthew | Jun 5, 2006 11:48:28 AM

I meant to add that the ICE contract is deliverable.

Posted by: Matthew | Jun 5, 2006 11:50:44 AM

Surely individuals could be included indirectly by making their suppliers get permits.

Tim adds: Treansport is the main one not covered.

Posted by: EU Serf | Jun 5, 2006 2:45:55 PM

There is a firm in America (saw it in Wired a while ago) that will sell you a sticker for your car that certifies its carbon emission is bought and retired: presumably they pool the money and then buy a contract, which they hold to expiry. As you say, the idea is to drive up the price of carbon emissions and thereby compensate for your own emissions. I toyed with the idea of doing that here to scalp the Guardianistas, but didn't get much beyond registering the url.

Posted by: Stephen | Jun 5, 2006 5:29:42 PM

I think the carbon trading system is a good way to bring more competition into the market.
More efficient companies will surely benifit from the carbon emissions trade.

Posted by: Maria loves pictures | Jun 5, 2006 7:09:19 PM

You thought Keynes had a problem when he had to take delivery on his wheat futures...you can't keep liquid CO2 in the college chapel, after all.

Posted by: Alex | Jun 6, 2006 11:39:08 AM