A futures contract whose underlying is pollution rights. In the United States, it refers to a futures contract based on U.S.-based utilities’ transferable right to emit sulfur dioxide. This relatively new type of futures contracts was introduced as a result of the Clean Air Act of 1990. The CBOT launched annual auctions on these futures in 1993 whereby power utilities buy and sell rights to emit or pollute the air (emission allowances). Investors can use pollution futures to speculate on the future prices of emission allowances.
December 21, 2024
