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Being from Southern Cal I might know something about what's driving this.
In the states, polluters actually pay the government for the right to
pollute the air. For instance large energy conglomerates like Edison Corp
actually pay for the right to pump out so much pollution per unit of air.
Edison pays the government to legally emit carbon-based pollution when
they generate electricity. Other large companies that pollute like Alcoa
and Kaiser (there are lots of others) also pay. It's my understanding that
just like electricity can be traded among companies, so can pollution
space. In fact if Edison is anticipating a surge in demand, they will buy
pollution rights from say Kaiser so that they can produce more energy
without exceeding their pollution allotment. Thus a market is created and
the need to hedge against price fluctuations is also created. I'm sure if
they do it in America, they do in other places too. It would be nice to
see a global air space created so countries that excessively pollute the
global air space must pay up when it falls out in a different country.
-----Original Message-----
From: Tim McCaughey [SMTP:TimM@xxxxxxxxxx]
Sent: Monday, August 30, 1999 4:44 PM
To: omega-list@xxxxxxxxxx
Subject: More interesting futures contracts
After Mark Brown's mail about introducing a weather based contract I think
the Sydney Futures Exchange has gone one stranger.
"SFE chief executive Mr Les Hosking said the exchange's aim was to create
a carbon trading market that was "truly global" and for Sydney to become
the
Asia-Pacific centre for the trade.
The SFE's intention was to "securitise air", Mr Hosking said."
http://www.afr.com.au/content/current/news/news5.html
for more details.
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