The plan, at first glance, seems simplicity itself: by charging companies for the right to emit CO2, the government hopes to encourage them to switch to cleaner and greener technologies. It is the latest development in a global campaign to save the planet by making polluters pay.

We are witnessing the birth of the greatest and most complex commodity market the world has seen. Last year alone, permits worth more than £55 billion were traded on the world’s carbon markets – but future trading volumes, if all goes global according to plan, will dwarf these.

Carbon trading schemes originate from the Kyoto protocol on climate change agreed under the auspices of the United Nations in 1997. Governments adhering to Kyoto accept limits on the CO2 their countries can emit. To meet their pledges, they put caps on the carbon outputs of domestic companies, which have to buy annual permits to exceed them.

Permits are bought from governments or from carbon traders, who, naturally, charge a commission. For the City the arrival of carbon trading is a bonanza. The sector already employs about 3,000 people and has created a few dozen new millionaires.

It sounds good news for everyone: governments, taxpayers, City boys and the environment. The reality is a great deal less rosy – indeed some of those closest to the carbon markets say openly that the system is doomed to failure.

Many carbon traders believe they could make the system work but fear the politicians who oversee it will never dare put a sufficiently high price on carbon emissions to make a difference.

The idea is certainly appealing: if a company is emitting too much CO2 it can either make cuts or pay other companies to cut their emissions instead. If it turns out to be cheaper to pay someone in China to plant a forest to absorb carbon dioxide, or a factory in India to install clean technology to cut its emissions of greenhouse gases, then this is allowed, provided the project has been approved under the UN framework convention on climate change. For each tonne of CO2 saved, the convention issues a certified emission reduction certificate, or CER. These are valuable: indeed, they are the nearest thing to currency that the carbon markets acknowledge. Each one is worth about £14.

The original plan was to create a system for transferring wealth from developed countries such as Britain and America to the Third World, hence killing two birds with one stone: cutting emissions and helping international development.

Greed—the buzz kill–will rear its ugly little head and then this will become just another crisis waiting to happen.