Essay - Carbon on Credit: Global Warming and the Derivatives Markets

The environmental community may be missing the forest for the trees. Environmentally conscious consumers know that every purchase counts, and that taken together all our choices make up a “forest” of environmentally crucial decisions. But are we missing an even bigger forest, one that has an important connection to climate change?

I think we are, although it can only be found, with a little digging, in the back pages of the financial press. But while some, or even many, environmentalists may read a bit about carbontrading programs or solar energy tax credits, how often do they read about the money supply, the yen carry trade, and credit instruments? Rarely, I suspect.We live a world apart from the Wall Street financial wizards.

But it may be that this world is where a really giant forest lies—a forest of credit options. And this forest “emits” carbon, rather than sequestering it. Here’s what I mean...