Finance question #8871b

[fivemack]

This is the classic question that occurs whenever you read about mildly exotic financial instruments: how do I go about buying them?

I'd like to buy, through the European ETS, permission to emit fifty tons of CO2 in 2008-9. I have no intention of emitting fifty tons of CO2 this year - it's about five times the UK's per-capita annual CO2 output, the equivalent of ten round-the-world flights or fifteen years of my electricity usage - but as far as I have read a carbon-trading scheme only works in a green fashion if there are people prepared to buy CO2-emission permits and then not emit the CO2.

Lots of sites give a vague figure as to how much an ETS ton of CO2 costs, lots of sites say that there's a secondary market in the things; www.pointcarbon.com has a graph at the side of the page suggesting that the fifty tons of CO2 would cost me about a thousand pounds (EUR23.40/ton), and will graciously permit me to see more data for the trifling sum of twelve hundred Euros, but I can't find anywhere that will take a cheque for a thousand pounds, inscribe me on the EU Carbon Registry at www.emissionsregistry.gov.uk, and give me the certificates.

Comments

[pseudomonas.livejournal.com]

Where does the money go? I mean, who generates the permits, and at what price do they sell them initially? Does the price increase as demand increases?

[(Anonymous)]

They've just mentioned this company, Carbon Clear (http://www.carbon-clear.com/) on Radio 4's PM programme.

[ceb.livejournal.com]

When Ian and I looked a couple of years ago, individuals were not allowed to buy them.

[pavanne.livejournal.com]

You can't buy them as an individual, because it's not a liquid market. You'd have to want enough of them to be worth brokering a deal with someone who's going to not emit on your behalf (eg by upgrading the efficiency of a cement plant in China, that kind of thing). The brokerage costs are going to be big. I know this because it's worth the brokers buying services like Point Carbon and, ahem, my employer's sister company, New Carbon Finance.

I shall ask my NCF colleagues on Monday. But my gut feeling is that you are best off buying from a voluntary offset provider which says it sources credits under the EU-ETS.

My other feeling is that this is not a cost-effective use of your laudable charitable urges. Phase I of the EU ETS is in substantial oversupply if you count the 'hot air' credits from the former USSR. Japan - which, to be fair, accepted stringent targets and already leads the world in efficiency - will end up buying some of this hot air, so all you are doing is pushing up the prices Japan will pay Russia. I'm not sure this is terribly useful. At very least you might want to buy Phase II credits, where the market is expected to be in undersupply and there won't be (I think) any hot air. Or you could probably find a more useful way to spend a thousand pounds to reduce emissions, even if it's a bit more contreversial, eg buying rainforest to protect it (new imperialism etc).