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UBS launches first ever emissions index

Zurich / London Media Releases EMEA

Investors will have access to the market of emissions allowances

UBS launches today the UBS World Emissions Index (UBS-WEMI) - the first index for global markets of emissions allowances. At the time of launch, this index will cover several European emissions trading platforms, all of which are part of the European Emissions Trading Scheme (EU ETS). Additional emissions programmes will be continually observed for potential future membership in the index. The index will be published in USD, EUR and CHF.

Climate change is one of the greatest environmental challenges facing the world today: rising global temperatures bring changes in weather patterns, rising sea levels and increased frequency and intensity of extreme weather events. All these consequences make the climate change theory - in particular the role played by greenhouse gases in global warming - a central topic of discussion, leading to the implementation of programmes such as the Kyoto Protocol.

The Kyoto Protocol - signed in 1997 and ratified by a total of 165 countries by August 2006 - created a framework and a set of rules for a global emissions market, via the introduction of a "cap and trade" system. Under the system, which provides the backbone for Kyoto, industries who are able to reduce their emissions at a low cost have the ability to sell their unused permits (allowances/certificates) to other industries requiring them, thereby creating an emissions allowances market, and ensuring that emission reductions are achieved in a cost-effective manner.

The commitment period of the Kyoto Protocol starts in 2008. However, Europe has chosen early implementation with the European Emissions Trading Scheme (EU ETS), a scheme for carbon dioxide (CO2) emissions reduction, which was implemented on 1 January, 2005. In 2008, this scheme could potentially be broadened to include all six greenhouse gases covered by the Kyoto Protocol.

UBS believes that the global emissions markets have gained prominence over the last couple of years and are set to grow, both in volume and scope.

The UBS-WEMI has been created as an international benchmark of tradable derivative instruments referencing emissions allowances. At the start, the index is composed as an open basket of future contracts on EU ETS carbon dioxide (CO2), weighted between two European trading platforms - the European Climate Exchange and the Nordic Power Exchange. The weights are allocated based upon the liquidity of the underlying emissions trading platforms.

The index composition and weightings of all underlying emissions trading platforms as of 2 November 2006 are as follows:

CO 2 ECX (European Climate Exchange):


CO 2 NP (Nordic Power Exchange):


This index adds a new dimension to the world of commodity indices by creating the first ever index covering emissions globally and can serve as a suitable basis for structured financial products. Its launch means that investors will, for the very first time, have access to an investment instrument that gives them exposure to the global markets of emissions allowances as they evolve.


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