30 May 2006, Financial Times

Hot Air Balloons as a Tradable Commodity

Fiona Harvey looks at the significant achievement of advocates of regulation and why their idea seems to be taking off. The following is an abstract of this article.

"In the first quarter of the year, $1bn of hot air was traded internationally, according to the World Bank. The figures illustrate a remarkable achievement for advocates of environmental regulation: Carbon dioxide previously an  unconsidered by-product of fossil fuel combustion, has become a valuable commodity in little more than a year."

"But the fledging market in carbon took a heavy blow in April when a collapse in the carbon price in European Union's greenhouse gas emissions trading scheme appalled investors... As the first such scheme in the world, it provides a benchmark by which the world's trade in carbon could be judged. When its prices plunged some investors feared the whole concept of carbon trading was in jeopardy."

"The concern was over done says James Cameron, Vice Chairman, of Climate Change Capital. Within a few weeks, the carbon price had recovered."

"Mr. Cameron says hiccups were to be expected in the early stages of a brand new market of this kind. he argues 'This has been an educative process. But it would be wrong to say that the carbon market is not working or will not work'."

Halldor Thorgeirsson, of the UN Climate Change Secretariat says: "The fact that the carbon market is enjoying such remarkable growth is a clear indication of the success of the Kyoto protocol's flexible mechanisms."

"Even if Kyoto does not continue in its present form, it seems unlikely that carbon trading will not persist beyond 2012. Many developed and developing nations have a strong stake in its continuation."

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