Australian Lefty on Politics, Governance, Science and Info Management

Betting on bad climate changes

Posted by Dave Bath on 2008-02-03

I’d overlooked a VoxEU post (Climate change negotiations PLC?) that discusses an Irish market company starting to make contracts on achieved carbon reduction that are similar in concept to options and futures markets.


As for all derivatives, I’m suspicious of abuses – such as those who will "hedge" and make a windfall if targets aren’t reached.  Perhaps if any profits from these pessimistic hedges were ploughed into fixing the problem, it might not be a bad thing: but I doubt that most players in derivatives are motivated by a social conscience.

I’m still trying to figure out what I think about this.  Should such markets be illegal?  What do others think of the pros and cons?

Meanwhile, for more articles by economics academics on climate change that are either out-of-the-square or hard-nosed and encouraging, visit the VoxEU Environment pages.

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