The scrolling ribbon is a simulated EUA (EU Allowance) spot price following a mean-reverting stochastic process — the standard way carbon-price desks model an emissions-trading benchmark. Each translucent slab beside the ribbon is a company with a compliance obligation to surrender one allowance per tonne emitted. A company's effective cost depends on how much of its exposure is hedged and with what instrument.
dS = κ(μ−S)dt + drift·dt + σ·√dt·Z
Futures: cost = h·F + (1−h)·S
Options: cost = h·(min(S, K) + premium) + (1−h)·S
- Futures — locks a price F today for delivery later. It removes upside and downside: the hedged share of the bill no longer moves with the spot ribbon at all, it just tracks the flat gold plane.
- Options — a call option caps the hedged share at strike K plus an upfront premium, but still lets a company benefit when the spot price falls below the strike. The trade-off is the premium, paid whether or not the cap is ever used.
- Hedge ratio / spread — the average share of exposure each company covers, spread apart so bars are visibly staggered — a fully-hedged company (bar pinned to the lock plane) versus a fully-exposed one (bar tracking the wild spot ribbon).
- Roll / lock now — re-strikes the futures price or option strike at the current spot, as a real desk does when a contract rolls to the next delivery period.
Real-world relevance: EU ETS allowance prices are volatile enough that unhedged emitters face real earnings risk from compliance costs alone — this is exactly why utilities, cement makers and airlines run active carbon-hedging books using EUA futures and options on ICE and EEX.