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I have pointed out that (1) the giant banks will make a killing on carbon trading, (2) while the leading scientist crusading against global warming says it won't work, and (3) there is a very high probability of massive fraud and insider trading in the carbon trading markets.
Now, Bloomberg notes that the carbon trading scheme will be centered around derivatives:
The banks are preparing to do with carbon what they’ve done before: design and market derivatives contracts that will help client companies hedge their price risk over the long term. They’re also ready to sell carbon-related financial products to outside investors.
[Blythe] Masters says banks must be allowed to lead the way if a mandatory carbon-trading system is going to help save the planet at the lowest possible cost. And derivatives related to carbon must be part of the mix, she says. Derivatives are securities whose value is derived from the value of an underlying commodity -- in this case, CO2 and other greenhouse gases...
Who is Blythe Masters?
She is the JP Morgan employee who invented credit default swaps, and is now heading JPM's carbon trading efforts. As Bloomberg notes (this and all remaining quotes are from the above-linked Bloomberg article):
Masters, 40, oversees the New York bank’s environmental businesses as the firm’s global head of commodities..
After months of extensive research and development the Asian Carbon Trade Exchange (ACT) has announced that they have finalized the structuring of their Trading Participation Platform (TPP) membership plans.
Investors, SME’s and individuals who enroll by purchasing a TPP Membership Plan are enabled to buy and sell carbon, environmental, energy and resource credits in the fast growing global markets.
The ACT proprietary TPP features empowers participants to:
a) have each trade cleared through appropriate exchanges, assuring transparency and legitimacy;
b) have their positions pooled with alliance partners to take advantage of attractive niche profit potentials which hereto for have been only available to institutional traders;
c) exercise the flexibility to move trading units in and out of the following markets: sequestered qualified Carbon Credits; internal and external markets for Emissions Allowances; Weather Derivatives and Renewable Energy Certificates.