Carbon trading surges in London

The carbon trading business is ramping up in London, as more European countries commit to policies to reduce emissions. The New York Times notes that many top banks, like Goldman Sachs and Morgan Stanley, are staffing up quickly. In the Mayfair area, some boutiques are sprouting up to generate carbon emissions reductions via allowances among other things. Some think the market could rival credit derivatives in growth. It works like this: Companies that emit too much must purchase allowances to cover the excess pollution, while companies that do not emit too much can sell their excess on the open market. While the market is exploding in Europe, it is lagging in the U.S., despite some strong activity years ago--that stems in part from the decision not to ratify the Kyoto Protocol.

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