Carbon permit trading2.1 Relevance and organization of emissions trading Greenhouse gases, such as water vapour, carbon dioxide, ozone and methane produced by power plants , transport and factories, are considered the main driver of climate change with devastating impact on nature. More recent efforts by global actors to “go green” by offering zero-carbon products are unlikely to succeed in stopping global warming (John Gapper, 2006 and Heide Bachram, 2004). Therefore, it is once again up to governments to promote emissions reductions by putting a price on emissions. The United Nations' famous Kyoto Protocol is an agreement on the environment and sustainable development established to support and monitor governments' efforts to reduce emissions (UNFCCC). To do this, governments can identify alternatives, impose standards and processes, and emissions trading (Matthew Dalton, 2007). The most advanced trading market is the Emissions Trading Scheme (EU ETS) of the European Union which is the main subject of the following chapters.2.2. Commercial opportunities of emissions markets2.2.1. Commercial gains from surplus permits Cap-and-trade markets such as the ETS are established to reduce the amount of greenhouse gases, particularly carbon dioxide, by steadily reducing the upper emission limit (cap) of participating countries (The Economist, 2007). Companies, which currently operate mainly in energy-intensive sectors, are allocated emission allowances (EUAs) based on a historical level of emissions reduced by a country-specific reduction, see table in the appendix (European Union, 2007) . The cap is considered an incentive for companies to improve their production processes, to promote the use of alternative energy to... middle of paper... carries risks for investors. The market is speculative as the “learning curve” of emissions trading is still at a low level and emissions data appears to be insufficient to provide sufficient certainty. The allocation rules seem quite unpredictable and certainly do not create confidence in regulators and authorities. Changing the rules early can influence price levels and accidentally increase the attractiveness of substitutes. Companies that view emissions trading as an added cost and regulatory burden may fear falling behind international competitors. However, as the supply of natural resources steadily decreases and consumer awareness of global warming increases, companies may even benefit from a first-mover advantage and unique sales prospects. Recent examples include the CSR and "green products" advertising campaign that many industries currently experience in developed countries.