Doug wrote:
<snip>
> ABSTRACT:
> A new instrument for hedging weather risks has made its
> appearance in the financial arena. Trade in 'weather
> derivatives' has taken off in the US, and interest is growing
> elsewhere. Whilst such contracts may be simply interpreted as a
> new tool for solving a historical problem, the question
> addressed in this paper is if, besides other factors, the
> appearance of weather derivatives is somehow related to
> anthropogenic climate change. Our tentative answer is positive.
> Since 'global warming' does not simply mean an increase in
> averaged temperatures, but increased climate variability, and
> increased frequency and magnitude of weather extremes,
> derivative contracts may potentially become a useful tool for
> hedging some weather risks, insofar as they may provide coverage
> at a lower cost than standard insurance schemes.
>
> Keywords: Global warming, climate variability, insurance
> coverage, weather derivatives
>
The relation between weather derivatives and anthropogenic weather change may be more immediate than these guys suggest.
Enron created the Weather Derivatives Market in the United States, and expanded to cover Europe and East Asia. It then played a major role in setting the Bushies energy policy... which started by repudiating the Kyoto Protocol. The image I have of these guys now is that on one floor of their skyscraper in Houston a bunch of them were creating "Anthrax exposure swaps" and on another floor others were mailing the spores.
john mage
http://www.platts.com/features/weatherderivs/index.shtml A Brief History of Weather Derivatives [abridged- jm]
September 1997: Enron and Koch transact first degree-day swap.
September 1998: First international weather derivative, between Enron and Scottish Hydro.
October 1999: First weather bonds marketed (Enron) and placed (Koch).
January 2000: First weather contract traded on EnronOnline.
slick website still up at: http://www.EnronWeather.com
http://www.earthtimes.org/jul/climatechangebushsstancejul12_01.htm Bush's stance on the Kyoto Protocol backed by US industries
By MICHAEL KWON Labeling the Kyoto Protocol as the wrong approach to the curbing of global warming, energy companies in the United States, including ExxonMobil and Enron said they support measures that are economically sensible for the US ...