The phones don't stop ringing these days at the offices of Vertis Environmental Finance. People from all over the country are calling to find out one thing: how to turn carbon dioxide into cash.

"We've never had a quiet office, but the amount of phone calls we're receiving from clients is growing more every day," said Martin Cmíral, the company's managing director. "Basically, at least two of our employees are permanently on the line answering questions."

Vertis Environmental Finance is an investment advisory firm specializing in emissions trading, the practice of trading carbon dioxide emission allowances like shares on a stock market.

In mid-October the Czech Republic became the 13th country in the European Union to open a market for emissions vouchers trading. The vouchers measure in metric tons the amount of carbon dioxide a country can release into the environment each year, which is regulated by the European Commission (EC).

To facilitate industrial growth, the Industry and Trade Ministry in October 2004 asked the EC to set emission limits above the amount currently produced annually, allowing industrial firms the opportunity to sell unused emission credits for cash on a new market that operates similar to a stock exchange.

Cmíral and his colleagues are dealing with a major influx of inquiries from clients asking how they can get a foothold in the market, which is expected to be worth hundreds of millions of euros by year's end.

"Many companies have realized that they give them a good opportunity to get quick and easy money," Cmíral said.

New market

In April the EC allocated the Czech Republic vouchers worth 97.6 million metrics tons of annual carbon dioxide emissions. Only around 90 million metric tons of carbon dioxide are produced in the Czech Republic every year, so approximately10 million vouchers could be up for sale by the end of 2005.

This surplus prompted the Organizer of the Energy Market (OTE), which coordinates transactions of emission vouchers, to begin offering trading on electronic accounts in October.

The Industry and Trade Ministry grants vouchers to companies; those that do not produce the allowed amount of carbon dioxide, which the ministry sets after reviewing their past production levels, can sell the vouchers through the electronic accounts to those who exceed limits. Companies that exceed emission allowances are subject to hefty government fines.

Dozens of firms have started playing the market and more are expected to enter. Jet maker Aero Vodochody and heat plant Pražská teplárenská both have plans to start selling vouchers. Selling carbon credit can boost cash flow significantly, as each voucher is worth around 20 euros ($23.60).

"We've already joined in the trading," said Pražská teplárenská's spokeswoman Sylva Prokešová. "Given the warm fall, we expect that we'll spend fewer carbon credits and we'll try to sell the reserve ones."

Further expansion

After a month of trading, OTE has registered more than 100 transactions, said account administrator Igor Chemišinec. Some 64 were made inside this country. In roughly a third emission vouchers were transferred abroad, and in six cases domestic firms bought foreign vouchers.

Chemišinec said transactions are made every day.

Vertis Environmental Finance's Cmíral said an average transaction involves 10,000 to 30,000 vouchers. Direct transactions account for the largest share of trading, though some vouchers are being traded through forward contracts, a promise to buy or sell vouchers in the future at previously agreed upon conditions, including price and volume.

The price of vouchers is falling, Cmíral said, so many small and midsize companies will be keen to sell their surplus credits to make quick profit.

Growing trade volume could also prompt other financial institutions to open trading markets to get a piece of the action, Cmíral predicted.