Friday, January 07, 2005

Emissions Trading (huh?)

For the same reasons supporting the Kyoto protocol and a bunch of other agreements, in reaction to the claims of the critics ofgreehouse gases and those against global warming, and basically for some who are simply in it for the greed, the world is now experiencing (as of 2005) a huge paradigm shift in the management of reduction of pollution: Emissions Trading.

This is basically bringing to the market place the responsibility of reducing greenhouse gases. Basically, giving everyone a limit on how much they can pollute and slowly reducing it over time. Those with excess "allowances" can sell theirs to other who need to pollute a bit more (for yearly periods at a time). The overall goal is basically to foster the trading of allowances with the goal of distributing the liability of reduction. And if you pollute too much (over your allowance which is based on the size of your factory, plant, generator, kilowat generation, smokestack, etc) you get a huge fine.

I am interested in it because of the chance to trade a new commodity. For those of you who don't know, I am what you call a sales trader. Something like a broker but with a little more oomph to it. Basically I have been trading gold, silver, currencies, and then later emerging market shares, and even some distressed debt. I will never claim to be in the same idiot's club as those guys on CNBC or at the Nasdaq ringing the bell. Buy my background in a bunch of countries, watching the egos grown and crushed, fortunes amassed and missplaced, ethics touted and ignored,.. gives me the ability to be a wide ranging cynic and opportunist into these fields of irrationality. I never made the huge cash-out and have chased the latest gold rush more than a few times, only to pawn my shovel at the end.

And now, with that poor sales pitch, I am looking at the burgeoning market for European Union Allowances, Emission Reduction Units, Certified Emisssion Reductions, Joint Implemetation, etc etc. Basically the complicated system of getting everyone on board and making these tradeable units fungible (a real word meaning "exchangeable")

Why do I go for this rare and bizzare smoke trading market?

A number of reasons. One big one is to keep me employable (because being bored and useless in Czech equities sales to UK brokers is a major threat). Also to expand my capabilities. And to make some money. And... to enjoy one of the greatest pleasuires in a traders life. Buying and selling with a Wide Spread. What Joy!

Many early markets like the early days of Czech and Ukrainian Equities, or Serbian Savings Bonds, give traders the opportunity to buy from the market (in this case the local emitters in Central Europe with surplus allowances) and sell to the Western professional Brokers of and end investors and users (like the big petroleum refineries and energy generators).

And it is all starting now. Keep an eye on this market. My company may or may not make the grade. But we are keeping our fingers crosssed.

1 comment:

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