How to get cool profits from global warming

Climate change needn't burn a hole in your pocket. Jody Clarke explains the EU's Emissions Trading Scheme and gives his tips on how to play the carbon trading market.

1 January 2005 was supposed to be a great day for the environment it was the day that the power of the market was unleashed to save the world from global warming. In the biggest scheme of its kind, the 15 members of the European Union (EU) pledged to cut carbon dioxide (a key greenhouse gas) emissions by 20% by no later than 2020. They would do this by capping the amount of carbon produced by the most polluting industries using a vast carbon-trading scheme. It was the "most important piece of climate change legislation anywhere in the world to date", says Friends of the Earth.

Sounds great. But three years later, emissions are actually up. In 2007 alone they rose by 0.68% across Europe and 2.2% in Britain. It may not seem like much, but it's hardly contributing to saving the environment. Where carbon trading was supposed to encourage the development of wind and solar farms to replace coal-hungry power plants, we've seen even more of the latter. Firms have been able to increase their emissions, rather than cutting them, partly because permits have been too cheap. So what went wrong and how can investors profit from the drive to make the system work?

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Jody Clarke

Jody studied at the University of Limerick and was a senior writer for MoneyWeek. Jody is experienced in interviewing, for example digging into the lives of an ex-M15 agent and quirky business owners who have made millions. Jody’s other areas of expertise include advice on funds, stocks and house prices.