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About This Document: Trading of greenhouse gas emission allowances has become standard activity on European energy desks, with European Climate Exchange (ECX) products acting as the benchmark for prices around the world. It was a market established exchanges such as the New York Mercantile Exchange and Eurex seemed willing to cede to the upstart, but now both are pulling out all the stops to gain a foothold in this rapidly expanding market -- and threatening the dominant position of ECX and its parent, Climate Exchange Plc, which also owns the Chicago Climate Exchange (CCX). Both ECX and CCX offer so-called "Carbon Financial Instruments" (CFIs), which are trading at about $35 per ton of carbon dioxide equivalents, representing a basket of greenhouse gasses on ECX, while CFIs on CCX are to be had for less than $2.50 per ton. The prices for voluntary allowances don't fluctuate as much in response to the utterances of negotiators as do compliance allowances, but they do offer plenty of trading opportunities, with more than a $1 trading range on CCX CFI futures in October of 2007 alone.

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Carbon exchanges gear up

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