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Melissa Carey, a climate-change analyst at the Environmental Defense Fund, says that despite all the greenhouse-gas trading under way, it won't reduce emissions until Kyoto takes effect. "Sulfur dioxide was successful," she says, "because there are huge penalties for failing to comply." One Kyoto provision lets industrialized countries fund carbon-reduction projects in developing countries that do not have emission caps. For example, a U.S. utility may find that cutting its emissions is more expensive than planting a carbon-trapping forest in Bolivia. But until Kyoto is ratified, there won't be any independent verification that the forest has been planted.
Another obstacle to wider trading of emissions is nature. Forests burn down. Hurricanes wash away fields. Then there are governments that ignore international agreements and change environmental policies in ways that can radically affect the value of existing emissions credits. Until financial instruments are developed to ensure credits against the ravages of politics and nature, trading greenhouse gases will be a risky business. But the traders at Natsource are betting that multinational firms are also learning about the risks of doing nothing in the face of regulations that they know are coming, sooner or later.