Trade Emission Trading Units

I was very very amused trying to understand the procedure and logic of Emission Trading Units, from a prospective friend I met at Starbucks , while both of us were wondering how to make Saturday night interesting over coffee. So I Learnt that ETU as per Kyoto Protocal are globally traded as in a stock market.

More about it....

"Emissions trading is a way of introducing flexibility into a system where participants have to meet emissions targets. These participants may be countries (as in the case of the Kyoto Protocol), or companies (as in the case of a domestic emissions trading scheme). Participants can buy units to cover any emissions above their targets, or sell units if they reduce their emissions below their targets. The presence of a market for these units creates a value for emissions reductions which stimulates investment in the most cost-effective areas. Emissions trading leads to a reduction in compliance costs compared to meeting the same target through domestic/internal means only. "

A growing no of companies are looking at emission trading as a key part of their strategy. The trade typically occurs when a company exceeding its emission units, looks out to buy units from another company that has used less. The reason for the later using less units, is because the latter has seriously invested in better equipment or research to achieve the needful. The former doesn't have the means to do so and hence it's easier for him to purchase it, rather than generate the result. Expand this to the global economy and the whole thing is a daily stock trading for CO2, nitrates, sulphates or any pollutant under the sun.

The trading in supervised for quality assurance by NGO's, independent consultants or mandatory emission trading programs, like the EU. Companies are getting involved in a big way. BP and Shell provide online traceability of their internal trading mechanism. GE has best practices forums on the same. Lots to be shaped up yet in terms of research, policies, action plans. But definitely a very enlightening conversation.