IFSL's new report on Carbon Markets shows that London is strengthening its position as the leading global centre of expertise. Trading in the rapidly expanding markets jumped a further 70% in 2007, with the volume of carbon dioxide emissions transacted worldwide rising from 1,745 million tonnes carbon dioxide to 2,983 mtCO2. Allowance-based transactions, accounted for over two thirds of trading and project-based transactions the remainder. The EU's Exchange Trading System (EU ETS) continues to dominate international activity in allowance-based markets. ECX (European Climate Exchange) carbon futures contracts, traded on the London-based ICE Futures Europe exchange, made up 89% of exchange trading on the EU ETS in 2007. The UK is also the leading investor in project-based transactions accounting for 59% of credits purchased in 2007, up from 54% in 2006.

Duncan McKenzie, IFSL's Director of Economics, said "Having gained first mover advantage from the UK's voluntary emissions trading scheme, London is building a strong position as the key global centre for carbon trading and investment." Lord Digby Jones, Minister for Trade and Investment, said: "This IFSL report is another signal that the City of London has cemented its position as the leading location for international carbon trading. The report's forecast is also positive news, with predictions that the high volume of carbon trading activity in London and abroad is expected to continue."  London's pivotal role in carbon markets is also reflected in 69 companies developing renewable technologies to have joined the London Stock Exchange's Alternative Investment Market by end-2007. Less favourable markets conditions meant that 13 companies joined in 2007, down from around 20 in each of the two previous years.

The aim of carbon markets is to help countries meet their targets for reduction in emissions of greenhouse gases under the Kyoto Protocol. In Western Europe the UK, Germany and France are on track to achieve their targets for the first period of the Protocol running from 2008-2012, but Spain and Italy are expected to fall short.