LONDON, June 18: A new highly innovative futures exchange market is being developed by the world’s leading exchange centres and the latest International Financial Services London (IFSL) report released on Monday on Carbon Markets & Emissions Trading shows how London is emerging as the key global centre of expertise in the rapidly expanding carbon markets.

According to a press release of the IFSL the aim of carbon markets and emissions trading is to help countries meet their targets for reduction in emissions of greenhouse gases under the Kyoto Protocol.

Emissions of greenhouse gases are typically converted into an equivalent measure of carbon dioxide emissions. Although emissions of UK installations and sectors under the EU ETS have exceeded their allowances in 2005 and 2006, the UK as a whole is on track to achieve its target for the first period of the Kyoto Protocol running from 2008-2012.

The volume of carbon dioxide emissions transacted worldwide more than doubled to the equivalent of 1,636 million tons of carbon dioxide in 2006, over two thirds in allowance-based transactions (companies achieving environmental targets through cap and trade systems) and the remainder project-based (companies investing in projects which can verifiably demonstrate reductions in greenhouse gases).

The EU’s Exchange Trading System (EU ETS) dominated international activity in allowance-based markets. London is central to the EU scheme as ECX (European Climate Exchange) CFI contracts, which are traded on the ICE Futures Exchange in London, made up 82pc of trading on the EU ETS in 2006.

The UK is also the leading investor in project-based transactions accounting for 50pc of such investments in 2006, reflecting the large number of purchases made by financial institutions in central London.

The UK has developed a core of expertise through gaining first mover advantage from its voluntary exchange trading scheme which ran from 2002 to 2006. London’s pivotal role is also reflected in over 60 companies to have joined the London Stock Exchange’s Alternative Investment Market that are developing alternative technologies that will contribute to the reduction of carbon emissions.

The aim of carbon markets and emissions trading is to help countries meet their targets for reduction in emissions of greenhouse gases under the Kyoto Protocol. Emissions of greenhouse gases are typically converted into an equivalent measure of carbon dioxide emissions.

Although emissions of UK installations and sectors under the EU ETS have exceeded their allowances in 2005 and 2006, the UK as a whole is on track to achieve its target for the first period of the Kyoto Protocol running from 2008-2012.