...Carbon Emissions Trading Market: Opportunities and Challenges in Creating A Market to Reach The Political Goal Authors: Class: Date: Module: Lecturer Institute Doreen K., Hari M., Lamberte I., MBAPT2011 26 March 2012 Managerial Economics The Hague University - Confidential This document is confidential. Neither the document nor any of the information contained in this document may be reproduced or disclosed to any parties without the written permission of the authors. Introduction Climate change is widely known to be the most important environmental problem for humankind on this Earth. As we know there is a limit with our atmosphere and the world’s economies are connected through trade and capital flows, and based on this situation, an international cooperation to control greenhouse gases is essential. Can each individual be relied upon to make decisions that influence the Earth’s carbon-dioxide concentration in the social interest? Must governments adjust the incentives we face so that our self-interested choices are also in the social interest? How can governments adjust the incentives? Parkin (2011) has argued that sometimes it is possible to reduce the inefficiency arising from an external cost by establishing a property right where one does not currently exist. Property rights are legally established titles to the ownership, use, and disposal of factors of production and goods and services that are enforceable in the courts. Since the Kyoto Protocol1 was signed...
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...purpose of Carbon Tax – Pros and Cons Researchers have been attempting to estimate the monetary value of damages in future resulting from climatic change. This change is associated with a steady increase in carbon dioxide emissions in every given year hence resulting in an attached value of the benefit from commensurate reduction of the toxic emissions. This measure is usually known as the social cost of carbon (SCC). SCC has been estimated by a task force of the federal government resulting from 1-ton carbon dioxide emission reduction in the year 2010 to be approximately $21 US dollars. Those values were found to be highest when the researchers consider the significant weight on the long-term outcomes. The severity of this matter cannot be also downplayed especially when we imagine the damages assuming climate change could increase more sharply in the coming years. This could lead to a lot of catastrophic occurrences. While the world delays efforts that are meant to reduce emissions, the risks associated with such emissions piles up to alarming levels. As days go by, larger amounts of carbon dioxide coupled with other toxic gases are emitted. Given the inherent uncertainty in predicting effects of change in climate and its possibility of triggering catastrophic effects, lawmakers may have to view a carbon tax as reflection of the will of the society to pay in order to reduce the risk in future of potentially expensive damages. The production of carbon dioxide...
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...Carbon Credit Trading as a way of Corporate Social Responsibility (CSR) Submitted to Ms. Neharika 10/29/2012 Birla Institute of Technology Mesra (Noida Ext. Centre) Devika Singh (IMBA/4567/12) Samridh Singh (IMBA/4565/12) Sunisha Gautam (IMBA/4566/12) Akshay Maheshwari (IMBA/4568/12) Carbon Credit as a way of Corporate Social Responsibility (CSR) The Collins English Dictionary defines a carbon credit as “a certificate showing that a government or company has paid to have a certain amount of carbon dioxide removed from the environment”. Carbon Credit is a permit that allows the holder to emit one ton of carbon dioxide. Credits are awarded to countries or groups that have reduced their greenhouse gases below their emission quota. Carbon credits can be traded in the international market at their current market price. Carbon credits and carbon markets are a component of national and international attempts to lessen the growth in concentrations of greenhouse gases. One carbon credit is equal to one metric tonne of carbon dioxide, or in some markets, carbon dioxide equivalent gases. There are also many companies that sell carbon credits...
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...Environmental Market Failure Negative Externalities Costs imposed on a 3rd party not involved with the consumption or production of the good (the external cost) Divergence between private and social cost MSC=MPC+MEC The MEC = the negative externality The free market price is less than the optimum price leading to over consumption Welfare loss Q: The market generated quantity (where privates crosses private) Q1: The optimum quantity (where social crosses social) Over consumption of Q-Q1 Unequal Distribution Effects Citizens in poor countries are more likely to be affected by the consequences of global warming that those in rich countries E.g. drought/flooding They are also a lot less likely to have consumed the goods and services which caused the global warming And a loss less able to protect them selves e.g. through insurance policies There are inequities between those who contribute to global warming and those who suffer from it Citizens of developed (polluting) countries pay less for their goods and services than the social costs of their production MSC=MPC+MEC Government Intervention to correct Environmental Market Failure 2 main types: Market based measures Designed to modify the price mechanism using strategies such as taxes and subsidies Government regulation Sometimes referred to as “Command and Control”, designed to create incentives for firms to reduce harmful...
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...situations. Property rights are rights an individual or businesses have towards their property including the rights to buy or sell the property itself without the permission of anyone since it belongs to them. Positive and negative externalities are the two types of externalities. A positive externality is the benefits of the third party by the consumption or production of goods and services and they do not pay for it. However a negative externality is the production or consumption of goods and services and causes a negative activity on others who are not directly related with the activity and the consumption is not paid. This will cause the social cost to be greater than the private cost. A social cost is the end results of producing a good or service when the private cost and the external costs are put together whereas a private cost is the cost abided...
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...of green taxes triples over a decade, new research shows. By James Kirkup, Political Correspondent, Published: 12:01AM BST 17 Aug 2010 The sum the Government levies from energy use will rise to more than £16 billion by 2020, a think tank has estimated. Policy Exchange, which has close links to Conservative ministers, calculated that the cost of green taxes, surcharges and other levies on energy will go from £5.7 billion this year to £16.3 billion in 2020. In 2020, some £6.4 billion of the total will come from levies applied to domestic energy consumption. That is up from £2 billion today. The increase will add £40 to the average household gas bill and £8 to an electricity bill, according to data from the Department of Energy and Climate Change. Household energy bills are increased by a number of Government environmental policies, including the Renewables Obligation and other levies applied to energy usage to fund low-carbon power generation. Energy companies also face charges for schemes including the European Union’s Emissions Trading Scheme, costs which are then passed on to customers. “Green” levies are meant to increase the price of carbon-emitting energy use, with the aim of funding alternative sources and encouraging consumers to change their behavior. Much of the money raised by such...
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...above the cap to buy allowances. A carbon cap is a more effective approach to solving global warming than a tax because it sets a clear goal for emissions reductions. By imposing a tax, we could count how much it will reduce carbon emissions, and it may not be sufficient to change the course of global warming. A carbon tax approaches the issues from a different perspective. The higher the tax, the more the emissions will decline. But in other side, Senator Barack Obama was correct. The carbon tax would be passed on consumer, while in a cap and trade system, business must purchase permits in order to emit carbon. So, if the cost of purchasing and using the equipment is less than the cost of buying a permit, the business will decrease the equipment usage. By that the costs for producer increase, decreasing supply and increasing the price of the final good in market. So, in either case, it will result in increasing market prices. 4. a. Cassanova will host P parties per month as proofed on the graph above. b. If suppose there’s a fixed marginal external benefit, then the graph could see on MSBp line. c. The socially optimal level of parties is P*. Social Committee could induce Cassanova by giving a per-unit subsidy of $b per party. d. The total optimal subsidy per party is ‘abcd’. Society comes out ahead by area ‘ghc’, assuming the subsidy can be raised without any efficiency costs. The subsidy can be raised without any efficiency costs. About the gains and losses, Cassanova’s...
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...Nations” that a private businessman worried only about the profitability of his investments, would be guided by an invisible hand , to those actions which are best for society as whole. But he also noted that the results do not always follow. More often than not, In a free market the managers will take into account the extra costs and benefits from their actions and decisions to their private business and not consider their effects on society as a whole. There are several reasons why the profitability of an investment from a society’s perspective may differ from the private business. An example would be the environmental pollution impact of the Leather tanning and textile dyeing industries vs. the private profits. The concept of social return is very complex considering that every project affects a wide cross section of society different ways. These impacts may be primary and secondary in nature. Determining the net impact for calculation of social returns is complex. This case provides a framework to analyze the social returns as compared to the private returns of an investment project .The methodology to do this is follows Define the reasons, why social and private returns will differ. Namely • Externalities- All large projects have negative and positive externalities. For example a new power plant in power starved Indian states may unlock a lot of productivity trapped for the lack of power supply (Positive) but will lead to pollution effects on society (Negative). Both of...
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...Environmental problem is one of the most concerns in 21st century. Australia has a great responsibility to reduce greenhouse emission as a global stakeholder. This report demonstrated the economic theory behind reducing carbon emissions and potential economic issues. First, a brief overview of Australia’s per capita carbon emissions is given, followed by explaining the relevant economic theory that underlies polices. Last but not least, an analysis of the potential economic issues is discussed. Australia’s emissions profile From the report, The Garnaut Climate Change Review, Garnaut （2008）pointed out that, Australia’s per capita carbon gas emissions are the highest of any OECD country and even are among the highest in the world. Statistic shows emissions were 28.1 tones carbon dioxide equivalent (CO2-e) per person in 2008. To be specific, Australia’s per capita emissions are nearly twice the OECD average and more than four times the world average. Economic theory and government policy A range of policies were introduced by government to achieve target reductions in carbon emissions sit. In order to ensure that 20 percent of Australia’s electricity supply comes from renewable sources by 2020, first the government launched a carbon market in Australian through carbon pricing mechanism and full emission trading scheme, followed by encourage expansion of renewable energy sources. The economic theory involved is that the goods and services produced by the government as a proportion...
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...safeguard their good image to the public and retain the public’s trust in them. This is to ensure that they will not lose their capabilities to maximize profits in this ever changing world economy. One particular industry that is firm in following such laws will be the aviation and the airline industries. In any airline industry, the safety of the passengers is their top priority. No one will be daring enough to board an airplane if the aviation crew repeatedly failed to search for any fault within the plane before it is ready for flight. Thus, it is up to the crew, consisting of engineers and technicians, to ensure that every plane has to be thoroughly checked, repaired and fueled before any departure happens. Hence, it is their social responsibility to ensure so. Such responsibility may seem too heavy for some employees, including the fact that they are carrying a huge weight on their shoulders. It takes one mistake or negligence and that is sufficient enough to throw thousands of lives in danger. Negligence may happen if the crew does not take external factors into consideration. External factors such as weather plays an important role in the crew’s decision making whether the plane...
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...Green Technology: A Cost Benefit Analysis of Business going Green Cost Benefit Analysis of Green Technology. I. Introduction Many business owners fear the costs associated with going green and although the net return varies according to the sector, in most cases these fears are unwarranted. Sustainable business practices should be evaluated based on a cost/benefit analysis. The benefits for things like brand reputation and employee loyalty, must be weighed against the costs and risks. When considering the value of sustainable practices businesses need to be notified of a wide range of benefits. Human resources are a good example of a department that benefits from greener practices. According to The Harvard Business Review’s summary of a number of green building studies, green facilities have been shown to increase the productivity of employees. Research further reveals that retailers who installed skylights saved energy and boosted sales by as much as 40 percent. Other research has indicated that loyalty and morale are positively impacted by a green workplace. Greening a physical environment contributes to health and reduces sick days. MonsterTRACK.com study revealed that people want to work for a company that is green. These factors enable green companies to attract and retain the best people, while saving human resources time and money. Green initiatives can save money, strengthen...
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...communities as to that the worldwide climate is changing, specifically warming, and that the activities of man are the primary cause, as for the degree of change and the possible effects, there is anything but a consensus. There is a fairly new concept that is taught in many businesses, colleges, and universities called the triple bottom line. This is referring to the three things that businesses should concern themselves with and strive to achieve excellence in if they wish to be sustainable; they are “profit, people, and the planet” (Elkington, 1995). The purpose of this research is to find out and explore some different ways that businesses today are utilizing good sustainability practices, and dive into some other areas like accounting for carbon emissions, and also seeing how accounting for predicted outcomes might work in the business environment. The environment affects us all and any sort of change, contingency, or preparation has to be accounted for, so this work is designed to find out how it is being done, and things that could be done to improve business. The triple bottom line The age old practice of businesses being concerned strictly with profits and how it affects shareholders is becoming a thing of the past. The short-sightedness of executives has in large part contributed to climate change and has helped erupt the business world into scandal over the past 20 years or so. The tendency to only look at quarterly profits or pressure accountants into employing “creative”...
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...Introduction NASA scientists of the 1960s discovered the growing cloud of Carbon dioxide and methane that surrounds Venus is the reason for its temperature of 600 degree Celsius. With this observation came a realization, that if the omission of carbon dioxide and greenhouse gases into the Earths atmosphere increased, it could be comparable to the temperature of Venus. This realization had sadly been known for centuries and is still known but no one continues to create a solution to this growing problem. We on earth face a challenge, and we need to find the solution. This solution can be reached through economics and science combining forces to ensure that future generations are able to survive and thrive. By understanding the nature of the global warming and creating effective economic policies we are able to become a step closer to making all the difference. The Global Warming Problem Global warming refers to the dramatic rise in the earth’s temperature due to the excess emission greenhouse gases such as carbon dioxide, water vapor and methane. This phenomenon of global warming has major implications for humanity and nature. With rising sea levels, hotter and drier weather and increases in uncertainty humanity is at risk and the natural environment. These turbulent conditions lead to rapid changes in economic activity in terms of out produce, the way in which all living things can exists. It is through the introduction of policies by governments and other bodies that...
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...The Economics of Cap-&Trade Programs Presentation Submitted by: Carpe Diem Group 13, Division B, GAPR11 What is Cap & Trade? • The Goal: Environmental Policy to set an overall limit on the amount of carbon that can be emitted • The Cap: Each company, will have a limit on the amount of greenhouse gas that it can emit. • The Trade: More efficient companies can sell their extra permits to companies that are not able to make reductions. Source: Text from “Cap and Trade 101”, Center for American Progress Emission Permit Market • Emission permits are traded in market; Creates a new market for ‘Clean Air’(Carbon-less air) Source: “Review of Forestry Carbon Standards”, Imperial College London More on Cap & Trade • The profits: – The program would generate $50 billion per year, but could reach up to $300 billion – The revenue can be used to invest in renewable energy, efficiency, low-carbon transportation technologies, green-collar job training etc Carbon Reduction Targets Source: “Review of Forestry Carbon Standards”, Imperial College London More on Cap & Trade • The cons: – Hard to quantify the effects of carbon emissions, hence put a price – Implementing, monitoring is a challenge – Highly political, highly manipulative Source: Members’ understanding EU-Emissions Trading Scheme (ETS) • • • • • • Largest multi-national emissions trading scheme in the world. The objective of EU-ETS is reduction of greenhouse gas emissions in a costeffective...
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...economic costs and low social acceptability. Low environmental impacts of nuclear power stem from the lack of fossil fuels it produces, nuclear is a very clean energy and the only waste products caused by it are water vapour and toxic waste from atom splitting. However this toxic waste is very dangerous due to its high radioactivity, and takes thousands of years to become non-toxic. Leakages from nuclear waste can have very serious impacts on the environment and people affected, such as in March 2014 when the only long-term geologic repository for nuclear waste in the United States suffered a radiation leak, with the initial report showing that 13 workers tested positive for radioactive contamination. However, aside from the waste, nuclear is a very clean recyclable energy as the atoms used to cause the reaction can be reused several times before they run out of energy. Nuclear power has low social acceptability partially due to the risk of leaks from toxic waste which can cause terminal illnesses such as cancer. Risk also stems from accidents or malfunctions causing meltdowns, which cause large areas to become susceptible to high radioactivity, affecting thousands, and making places un-livable. Accidents such as the 1986 Chernobyl incident in Ukraine caused an estimated 4000 deaths, although this figure is still debated over. Thirdly, many of the public worry about the risk that a terrorist attack on a nuclear power plant could have. Nuclear power has high economic costs due...
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