Derivative products have remained the source of much discussion among financial traders, especially as they have become increasingly popular in the last decade or so. They also account for the vast majority of liquidity in the financial market, as they allow investors to trade without the complications of ownership or the fluctuating value of a specific instrument. One of the latest developments in the market came with the establishment of carbon trading schemes that enabled businesses and individuals to profit from sustainability.
The Origins of Carbon Emissions Trading and its Popularity
The emergence of carbon emissions as a derivative product can be traced back to 2007, thanks primarily to the formation of the Kyoto Protocol. This international agreement, which is linked to the United Nations (UN) Framework Convention on Climate Change, established carbon reduction targets for 37 industrialized countries to meet between 2008 and 2012. Several measures were introduced as a result, including the creation of incentives for firms who engage in environmentally friendly processes like employing CO2 capture technology to mitigate emissions.
In essence, companies who produced carbon dioxide above their allocated quotas were forced to pay for this excess quantity. In contrast, firms that developed environmentally friendly procedures and processes were rewarded with carbon units, which could then be sold and traded in a unique market place. It was established that one credit should be equal to one metric ton of CO2, and the concept of carbon emissions trading quickly became one of international acclaim.
Growth and the Future: The Importance of Managing your Investments
The market and its underlying concept have since grown considerably, with the likelihood of further expansion offering bright portents for the future. The reason for this growth is two-fold, as not only is the drive to reduce carbon emissions a global concern but there has also been a period of transition as companies have strived to modify their operational methods. This has been the supply of carbon credits has been plentiful, allowing for a higher trading volume and greater returns.
Individuals have profited from this, and subsequently generated additional wealth and a more diverse trading portfolio. In this respect, the development of new derivatives such as carbon units has driven the need for improved wealth management techniques and service providers, such as the SIPP’s and similar products offered by companies such as Killik. Through these products, it is possible to maximise the power of margin-based derivatives and lay the foundations for a sound financial future.
