The purpose of this thesis is to explain the carbon emissions markets; what they are, how they work and what determines the carbon price. With a focal point on the EU ETS, the thesis deals with these problems with thorough explanations built on a large reference base together with economic and financial analysis. A distinct line has to be drawn between compliance and voluntary markets, with the EU ETS as the compliance powerhouse. Several carbon emissions products are currently available for trading with EUA futures being the most commonly traded. Major price drivers for the EU ETS allowances are political decisions, fuel/power prices, CDM supply and weather. In the analysis of Chapter 4.3, CAPM Beta for EUA Dec08 was set to be around 0.20 with only explaining ~2% of the asset‟s total risk. From the regression analysis we can infer that no linear relationship exists between returns on EUA Dec08 futures and the rate of return on the overall European stock market.