In 1989, sitting newly ensconced in his small ground-floor office at Chatham House, the home of the prestigious think-tank the Royal Institute of International Affairs in London, Michael Grubb had a ‘little idea’. This idea was the germ of what would become a vast and continually expanding set of markets which trade, in various ways, the carbon emissions produced by industrial economies and consumer lifestyles. At that point, the Intergovernmental Panel on Climate Change (IPCC) had just started meeting to prepare its first assessment report, and many governments were doing the rounds of international conferences declaring climate change a serious issue that needed a collective response.

Faced with the prospect of long, drawn-out negotiations between countries to work out how to reduce their collective emissions, Grubb, like other commentators at the time who had started to think about future climate negotiations, foresaw many problems. As we now recognise well, climate change is not like many other environmental issues. At the time, ozone depletion provided the most obvious model given that the Montreal Protocol had just successfully agreed to 50 per cent cuts in chlorofluorocarbons (CFCs), with more stringent cuts on the way. It also built on a general agreement (the Vienna Convention) rather like the Framework Convention that governments were trying to negotiate on climate change, so there were parallels. But unlike ozone depletion, climate change touches more or less every aspect of economic life, and goes to the literal engine of the industrial economy – energy use.