London is well placed to dominate the carbon emissions trading business after winning a 60 per cent stranglehold of the market in its early years, it was suggested yesterday.

International Financial Services London (IFSL), the ginger group for the City, said that Britain’s share of the market had developed to the point where it dwarfed that of Norway, France and Germany.

“London is the leading player,” said Duncan McKenzie, director of economics for IFSL. “It has first-mover advantage and a huge advantage going forward.”

Although the largest carbon trading system, the EU’s Emissions Trading Scheme (ETS), had been mired in controversy because of an oversupply of permits, a second phase is already under way. IFSL estimated that London handled about 60 per cent of the 1,649 million tonnes of carbon traded worldwide.

Apart from bilateral trades, most carbon emissions in the ETS system are traded through the ICE futures exchange, formerly the International Petroleum Exchange, in London.

These contracts accounted for 82 per cent of all ETS transactions. Oslo-based Nord Pool accounted for a further 11 per cent, Powernext of France, 6 per cent and European Energy Exchange in Germany, 1 per cent.

Emissions trading through London, though tiny compared with other commodity classes, gives revenues to brokers, investment banks, private traders and clearing houses.

It is expected to grow rapidly. Consultancy Point Carbon forecasts that the amount of carbon traded will soar by 50 per cent this year to 2.4 billion tonnes.

IFSL also pointed to 60 alternative energy companies listed on AIM, the junior London market, as evidence of the capital’s role in helping to curb emissions.

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