Yes, There Will Be Carbon Default Swaps

My father titled a recent poem on his blog Soon They’92ll Be Carbon Default Swaps I don’t know if he was being serious or not, but there will be.

Just as you can buy derivatives (the Wall St. term for making a bet) that a given month or week will have more or less heating or cooling degree days, or you can buy an instrument that pays off when company defaults on its debts, you will be able to hedge on a company’s ability to meet carbon limits. Heck, you will probably be able to buy options on carbon credits, and you will probably see carbon credit arbitrage between different markets – after all, different cultures place different values on clean air, right?

I’m telling you people, black is the new gold. We’re creating a new currency, and it’s not going to behave as expected.

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