The sooner we have a fully functional liquid carbon market, the sooner we can create hedging and risk management products and make them available to industry to reduce the impact of operating in a carbon constrained world.

While it's better than nothing, the Federal Government's Green paper on carbon trading recently released by Minister Penny Wong, rates about a five out of ten.

All the essential elements of an effective carbon market are there, but there is one word that has me worried: "however". Just about every time the report discusses best practice, or recommends the sorts of approaches identified by the Garnaut Review to reduce greenhouse emissions, it's followed up with the word however, and some excuse as to why they're not going to implement best practice.

The challenge I see is that all these "howevers" are potential market distortions which are going to get in the way of the "Carbon Pollution Reduction Scheme" actually delivering any emissions reduction, let alone delivering it at the lowest cost (which is ultimately the point of any trading scheme).