As the global warming debate continues to heat up, our European counterparts have instituted a carbon permit system, where carbon producers will need to secure permits to cover the amount of carbon they produce each year. In an effort to allow the markets to determine pricing, it appears as though futures traders across the pond will have a chance to get in on the game. Reuters reports:

Britain has awarded a contract to ICE Futures Europe to auction carbon permits in the third phase (2013-2020) of the European Union emissions trading scheme in a move that will boost volume on the most liquid carbon bourse…

Since 2005, the EU carbon market has set a cap on carbon dioxide (CO2) emissions that can be emitted by around 12,000 factories, power plants and other major polluters. This covers around half of the bloc’s emissions.

Within this cap, companies receive emission allowances – most for free – which they can sell to or buy from one another as needed.

Starting next year, EU member states aim to sell around half, or about 1 billion emissions allowances per year, as the bloc moves towards charging all companies for them…

ICE Futures won the tender to take over the auctioning, beating out rivals such as the Liepzig-based European Energy Exchange in Germany and BlueNext in Paris.

“ICE Futures Europe is delighted to be the preferred supplier for the UK government emissions auction which, once implemented, will further enhance liquidity across our range of emissions products,” a spokeswoman told Reuters.

ICE isn’t new to the emissions game, offering a suite of emissions-based markets for investors to consider. Will this mark the dawn of a permit futures market? There’s no way to know, though to us this sounds more like the CME expanding its purview to swaps clearing than the birth of a new futures opportunity abroad. That being said, we have to wonder… the cap-and-trade approach to regulating carbon emissions hasn’t gotten a ton of traction in the US to date. California is one of the few lone actors in this realm, and plans on using the revenue generated from the policy to build out a high speed rail line. To be fair, there’s a fair amount of academic debate regarding the veracity of such plans. However, in an increasingly green-leaning society, during a time where states are perpetually looking for new sources of revenue, could we see the plan gaining in popularity in the U.S.? If we do, could we see a similar market opening up with the CME? The U.S. is much larger, and would have far more emissions permits to be handled; would we be better suited for such a futures market? Only time will tell.