Emissions Trading

Is a scheme that applies a market approach to regulating the emissions of pollutants and greenhouse gases. ‘Emissions trading’ is used, rather than adopting a governmental, restrictive approach to regulating emissions. By allowing industry to self regulate, real economic incentives are provided for cleaner operations.


  • McLaren Formula One Racing Team buys carbon credits June 2012. They are the first carbon neutral F1 team so far.  

  • UBS forecast 195% market increase to the end of 2013.

  • Invest in Carbon Trading SIPP approved UK company – Click here


Here’s how it works

A central authority, normally a government, sets an overall cap for the amount of a certain pollutant that can be emitted. This cap is divided up amongst industry in the form of permits, or credits, allowing individual companies to emit only as much pollution as they hold credit for. Companies that require more permits may buy them from companies that don’t require their total allocation. The total number of permits (and consequently pollution) can never exceed the overall cap, but within industry, companies can trade permits, meaning that companies that buy permits are effectively paying for pollution whilst companies that sell permits are being rewarded for running cleaner operations.

Emmissions trading

Different markets

There are a number of emissions markets, each trading in a specific pollutant. There are local and regional markets as well as a national US market in say acid rain pollutants. The biggest greenhouse gas emissions trading market is the European Union Emission Trading Scheme (EUETS). EUETS trades in Carbon Credits and currently covers over 10,000 installations and accounts for 40% of Europe’s total greenhouse emissions. Carbon credits are issued for a fixed period and must be retired at the end of that period. The current trading period ends in 2012.

As well as a compliance carbon market, where countries may trade in carbon credits in order to meet their Kyoto Protocol targets, there is also a voluntary carbon market, Voluntary Emission Reduction (VER), where companies or individuals can trade in carbon credits.

How do I invest in emissions trading?

In the UK the world’s first economy wide emissions trading scheme was introduced in 2002. The UK Emissions Trading Scheme (UK ETS) ended in December 2006 however, with final reconciliation completed in March 2007. It is now closed to direct participants. UK residents wishing to invest in an emissions trading scheme should now consider carbon trading which is by far the largest sector in emissions trading.

Emission trading is only possible through buying and selling carbon credits and that is undertaken through a broker. Although if the reason for investing is based on profit then a carbon fund might be the best option. There are a number of funds available from all of the major financial institutions as well as a whole host of web-based businesses set up specifically for carbon trading. Before you invest in emissions trading be sure that you understand the market and seek expert advice as to forecasts for its future. If investing in a carbon / emissions fund, at the very least you should ensure that it is SIPP approved with a proven track record and a clearly stated exit strategy.

Emission trading is one of many green investments that allow you to control your own financial future with an eye on a better future for the next generations. We also discuss ethical investments which include teak, bamboo, forestry and timber farms.


Invest in Carbon Trading

SIPP approved UK company – Click here