A new report from the IFSL has revealed that London is emerging as the key global centre of expertise in the growing carbon markets.
The report, Carbon Markets & Emissions Trading, also revealed that the volume of carbon dioxide emissions transacted worldwide doubled in 2006 to the equivalent of 1,636 million tonnes. Of this, one-third were project-based transactions – investment in products which can reduce CO2 emissions - and two-thirds of transactions were allowance-based - companies achieve an environmental target through a cap and trade system.
According to the report, the EU Exchange Trading System (EU ETS) has dominated activity in allowance-based markets and London is central to the EU scheme. European Climate Exchange (ECX) CFI contracts, are traded on the ICE Futures Exchange in London, and made up 82% of all trading on the EU ETS during 2006.
The UK is the leading investor in project-based transactions and accounted for 50% of all such investment in 2006, due to large purchases made by London’s many financial institutions.
One reason for the UK’s success in this field is expertise gained through a voluntary trading scheme, which ran from 2002 to 2006. The 34 companies that participated in the scheme were able to reduce carbon emissions by 12 million tonnes.
The role of London in Carbon Trading schemes is further enhanced by over 60 companies, which have joined the London Stock Exchange’s Alternative Investment Market, which focuses on companies developing alternative technologies to reduce carbon emissions.
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