Making money out of thin air

Carbon dioxide for sale?

Reducing carbon dioxide emissions could itself become big business in the UK if it gains the upper hand in buying and selling of the greenhouse gas.

Where there's muck there's brass - even when the waste product in question cannot be seen.

The (almost) international push to reduce emissions of the "greenhouse" gas carbon dioxide in accordance with the Kyoto climate treaty could prove to be a money spinner for some.

Soon to be trading in hot air?

As a sweetener to the heavily-industrialised nations who have to make the deepest cuts in their release of the gas blamed for global warming, a system of so-called "carbon trading" has been endorsed.

Companies that cut their CO2 emissions below the cap decided by their government will be able to sell their surplus allowance to local or foreign businesses unable or unwilling to meet their own emissions targets.

The United States already operates a similar "cap and trade" system to control sulphur dioxide and nitrogen oxide output.

With the nation being the biggest CO2 producer, American commodity trading firms had been expecting the domestic carbon market to be worth perhaps $60bn a year.

Trading places

However, President Bush has stepped away from the Kyoto treaty for fear his nation's economic growth could be threatened by its implementation.

The detrimental effect of Kyoto on the US economy has been disputed, with UN economist Dr. Florentin Krause estimating that the full raft of emissions measures (including carbon trading) could have seen US gross domestic product rise by up to 1%.

However, the departure of the US strengthens the hand of London as the would-be home of international carbon trading and may put the UK ahead of the game in CO2 emissions technology.

Carbon trading could help deliver low-cost emission cuts

UK environment minister Michael Meacher, returning from the Bonn climate change conference, says he will push through the legislation to establish a domestic carbon trading market as soon as possible.

Trading requires legally binding emission targets to be set, CO2 monitoring to be established and a system of enforcement to be created.

Biting the bullet early on may actually benefit UK businesses in the long run, says KPMG sustainability advisor Melanie Eddis.

"There's a huge advantage to be the first to put in place a trading system."

British companies will be able to export any emissions-cutting techniques they pioneer and may even be first to benefit from selling surplus CO2 allowances once a European or global market develops.

Trading on the future

CO2e.com, a company already trading in carbon "futures", estimates a tonne of actual carbon dioxide could change hands for $10. With the EU producing 3,171 million tonnes of CO2, the potential trading market is massive.

There could be some "carbon millionaires", says Ms Eddis, though the profits of middlemen shouldn't detract from the widely held belief that carbon trading is the most effective way to push businesses to cut greenhouse gas emissions.

"Of course, many environmentalists don't like to see people making money out of pollution," she says.

One such critic is the green campaigner George Monbiot, who calls the whole idea of trading is "grossly unjust" since it will allow polluters to buy their way out of their responsibilities.