Preview

Carbon Finance

Powerful Essays
Open Document
Open Document
5182 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Carbon Finance
Financial Dimensions in Green Management – Understanding Carbon Finance

Sudha.S
Introduction

Environmental consciousness is taking its shape in various dimensions in today’s complex business world. The five mega issues which are impacting the behaviour of companies and in turn their strategies are the Climate Change, Polution/Health Consciousness, Globalization backlash, Energy Crunch and Erosion of Trust.[1]
The finance sector is impacted because the world commands a hefty price for Carbon dioxide emissions and greenhouse gases (GHGs). This is the major reason why today’s environmental issues elate to the level of corporate financial strategy and policy involving CEOs, CFOs and BOD of companies. Hence, an understanding of carbon finance (a specific dimension of environmental finance), role of the financial services sector (banking, insurance & investments) and carbon trading (as other commodity trading) in climate/commodity exchanges by environment-conscious stakeholders in various industry value chains assumes significance in the context of environmental risk mitigation and adherence to climate change policies.

Climate Change and Industry

Industries directly affected by climate change include Agriculture, Fisheries, Forestry, Health Care, Tourism, Water, Real Estate and Insurance[2]. GHG emissions from agricultural activities account for about 15% of global GHG emissions. Weather developments may also have negative consequences for carbon-regulated industries such as electric power, Oil and gas producers. The power industry contributes a major portion of the global CO2 production (Fig. 1.1).

Fig 1.1 Global CO2 production

[pic]
Source : World Business Council for Sustainable Development (www.wbcsd.org)

Climate Change – A Global political Overview

The United Nations Framework Convention on Climate Change (UNFCCC) Conference in 1997 produced the ‘Kyoto Protocol’(KP), under which 39 of the industrialized “annex 1” countries agreed


References: Sonia Labatt and Rodney R. White, 2007e, “Carbon Finance : The Financial Implications of Climate Change” Journals The Financial Express, April 3, 2008 Business Line, March 27, 2009
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Better Essays

    Carbon-Tax and a Cap-and-Trade Strategy
    • 1294 Words
    • 6 Pages

    Carbon-Tax and a Cap-and-Trade Strategy

    According to the case, the carbon-tax and a cap-and-trade system are the best economic tool to employ to reduce emissions. As we know, taxes are the most important expense for a company or firm, if they would emit much more carbon dioxide and other gases, they need to pay more taxes on using carbon recourses. It is stated (Bubna-Litic & Chalifour 2012) that ‘One of the defining features of carbon taxes is that they generate a relatively clear and predictable stream of revenue’. The revenue can be used in many different ways and a key issue is how that revenue is used. For instance, the tax expenditures are aimed at improving energy efficiency and this policy has a regulatory goal of addressing climate change that including gases emission. However, cap-and-trade is also leads to prove the efficiency due to the firms are free to trade. Cleetus (2011) argued that carbon prices adjust in keeping with general economic conditions automatically, and price volatility that could lead to greater uncertainty for business investment decisions. It is also mentioned that a transparent carbon market with good regulation and access to emission and trading data for participants. In a word, carbon taxes focus on taxable regulation for firms and cap-and-trade system concentrate on the monitor of carbon usage and the emission trading.…

    • 1294 Words
    • 6 Pages
    Better Essays
    Read More
  • Better Essays

    Home Depot Environmental Sustainability Audit
    • 2672 Words
    • 11 Pages

    Home Depot Environmental Sustainability Audit

    Environmental sustainability has become a hot topic in the last couple of decades because of global warming and other weather related changes. In today’s business world, environmental sustainability is an essential part of corporate social responsibility (CSR); therefore, very important to stockholders, owners, as well as to the public in general. Everybody wants to know how businesses are run and how their operations affect their communities for generations to come.…

    • 2672 Words
    • 11 Pages
    Better Essays
    Read More
  • Good Essays

    The Pros And Cons Of The Kyoto Protocol
    • 558 Words
    • 3 Pages

    The Pros And Cons Of The Kyoto Protocol

    In the late eighties and early nineties, the international community became increasingly concerned by the problem of climate change and realized that it is indeed an acute global issue. Amidst such an atmosphere, the text of an international treaty, the United Nations Framework Convention on Climate Change (UNFCCC) was adopted at the Earth Summit in Rio de Janeiro in 1992, and the Convention entered into force in 1994. However, by 1995 the countries realized that the provisions on emission reductions in the Convention were not adequate . The Kyoto Protocol, adopted in Kyoto, Japan, on 11 December 1997, was a result of the ensuing negotiations to make the global response to climate change more effective. The UNFCCC defines the Kyoto Protocol…

    • 558 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    Technology: Conducting and Social Media Sites
    • 545 Words
    • 3 Pages

    Technology: Conducting and Social Media Sites

    Conducting business in global markets can be very stressful. With regards to environmental factors, the way that business conducted is very important. We now live in a society where…

    • 545 Words
    • 3 Pages
    Good Essays
    Read More
  • Better Essays

    Best Response To Climate Change Essay
    • 1081 Words
    • 5 Pages

    Best Response To Climate Change Essay

    Mitigation efforts such as reducing climate change, involve reducing the atmospheric concentration of heat-trapping GHG’s. Reducing the use and source of these gases can do this. The economic approach to mitigating climate change provides economic cues and incentives for the business sector…

    • 1081 Words
    • 5 Pages
    Better Essays
    Read More
  • Good Essays

    renewable sources
    • 822 Words
    • 4 Pages

    renewable sources

    Restricting carbon emissions will not damage the economy. Reducing carbon emissions across the globe will not only help the earth’s climate by limiting global warming but also increase the cost for businesses. Aaron Ezroj believes “it will create many business opportunities in the financial sector, low carbon technologies, carbon capture-and-storage projects, advanced technology vehicles, and legal and nonlegal consulting.” A national policy has been put into place in the united states that will cut carbon emissions up to forty percent by 2033 while also growing the economy.…

    • 822 Words
    • 4 Pages
    Good Essays
    Read More
  • Best Essays

    The Environment Should Be Protected Because and Only Because Human Livelihoods Depend Upon It
    • 1659 Words
    • 7 Pages

    The Environment Should Be Protected Because and Only Because Human Livelihoods Depend Upon It

    * Gupta, S. et al. 13.2 Climate change and other related policies, in IPCC AR4 WG3 2007…

    • 1659 Words
    • 7 Pages
    Best Essays
    Read More
  • Powerful Essays

    Climate Change and Carbon Trading: New Avenues for Actuaries
    • 6005 Words
    • 25 Pages

    Climate Change and Carbon Trading: New Avenues for Actuaries

    We have also highlighted that Actuaries role is not just to consider the change in risk factors due to climate change in existing insurance products but they can also play a key role in carbon management by assessing the risk associated with various projects and can help companies in minimizing carbon liabilities. Actuaries and climatologists can work together to construct weather related catastrophe models and can employ them to stimulate future scenarios. Actuaries with their skill set can help in evaluation and pricing of carbon transactions. Actuaries have responsibility in advancing companies on the development of corporate climate change strategy and new insurance products that incentivize green…

    • 6005 Words
    • 25 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Carbon Finance in Africa and Strategies Employed by Google
    • 4045 Words
    • 17 Pages

    Carbon Finance in Africa and Strategies Employed by Google

    The market for trading allowances relating to the right to emit carbon dioxide or the Emissions Trading Market has expanded dramatically in the last few years and promises to continue to do so in the near future. It has an extremely high profile as it is intrinsically linked to worldwide efforts to address climate change. The key differences between the emissions market and the commodities markets are that it is a politically-generated and managed market and that the underlying is a dematerialized allowance certificate, as opposed to a physical commodity. Global warming is a high priority topic in any political index across the globe. Considerable efforts are being made in this direction, some of which include UN Framework Convention on Climate Change (UNFCCC) - 1992, the Kyoto Protocol - 1997 and the Bonn Agreement - 2001. The New Oxford American Dictionary even chose ‘carbon neutral’ as word of the year for 2006. Many liken the practice of buying carbon credits to buying pardons from the Catholic Church in 16th century Europe. We believe that it is easier to assess our progress and achieve our goals if we attach a value to something. It was found that economists too think the same and they jumped at the opportunity to attach a monetary value to the environment issue at hand. The paper attempts to advise these nations so that they may design an innovative mechanism which enables them to benefit from their carbon offset potential and not just rely on the good will of other nations. The paper does a Case Study on Africa and its huge potential to take the initiative in designing such a market.…

    • 4045 Words
    • 17 Pages
    Powerful Essays
    Read More
  • Satisfactory Essays

    Carbon Trade Trends
    • 4651 Words
    • 7 Pages

    Carbon Trade Trends

    A Research Paper By Dr. Seethalexmy N. Professor And Mr. Ganesan Jaibal T.Y.B.Com Student Of S.I.E.S. College of Commerce Economics T.V. Chidambaran Marg, Sion (E), Mumbai 400 022 Ph 9869261576 (Prof. Seethalexmy), 9967680584 (Mr. Ganesan) Email seetha_lexmy@hotmail.com, ganesan_711@yahoo.co.in Abstract This paper deals with the trends in carbon trade in the global market as well as in India. Not limiting itself with studying the economic impact of carbon trade, the paper also goes on to understand its ecological implications. The paper also reviews the pricing and accounting of carbon credits and its implications. The trends indicate that carbon trade has been increasing over the years. However, the project based transactions such as Clean Development Mechanism and Joint Implementation have shown a decline since 2007 the main causes for this being the global economic downturn and the speculation led growth of the secondary carbon market. In India, the recent trend is that of withholding the sale of carbon credits as the prices are low and as sellers expect demand to increase after the end of Phase I of Kyoto Protocol i.e. in 2012. The major economic implications may be the rising commodity prices in the developed countries on account of passing on of the price paid for carbon credits to the customers. Inflation in the developing countries is also one of the possible implications, which, of course, can be handled with appropriate regulatory weapons. An important economic impact in the current scenario of low prices is the pitiable position of those industries that have made huge investments in CDM projects expecting to recover their costs by selling the carbon credits without anticipating the fall in prices. Accounting for carbon credits in India could be done within the existing framework of the Accounting Standards issued by the Institute of Chartered Accountants of India. Market-based mechanism cannot effectively achieve the ecological objective of reducing…

    • 4651 Words
    • 7 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    CARBON CREDIT - A NEW MONETARY HARVEST
    • 2023 Words
    • 9 Pages

    CARBON CREDIT - A NEW MONETARY HARVEST

    Carbon credit is the brain child of United Nations Framework Convention on Climate Change (UNFCCC) to bring about a clean environment in the already polluted world. The increasing awareness about the environmental degradation gave rise to the concept called Carbon Credit. The IPCC (Intergovernmental Panel on Climate Change) has observed that:…

    • 2023 Words
    • 9 Pages
    Powerful Essays
    Read More
  • Good Essays

    Carbon Credits to Control Emissions
    • 298 Words
    • 2 Pages

    Carbon Credits to Control Emissions

    CARBON CREDITS The concept of carbon credits came into existence as a result of increasing awareness of the need for controlling emissions. The mechanism was formalized in the Kyoto Protocol, an international agreement between more than 170 countries. The Protocol agreed has fixed quotas on the maximum amount of Greenhouse gases which can be emitted by the developed and developing countries. In turn these countries set quotas on the emissions of installations run by local business and other organizations. Burning of fossil fuels is a major source of industrial greenhouse gas emissions, especially for power, cement, steel, textile, fertilizer and many other industries which rely on fossil fuels (coal, electricity derived from coal, natural gas and oil). The major greenhouse gases emitted by these industries are carbon dioxide, methane, nitrous oxide, hydro fluorocarbons (HFCs) etc., all of which increase the atmosphere’s ability to trap infrared energy and thus affect the climate. Each such business has been fixed with specified number of units, otherwise called ‘allowance of credits’, upto which can emit carbon dioxide or other equivalent greenhouse gas. Operators that have not used up their quotas can sell their unused allowances as Carbon Credits, while businesses that are about to exceed their quotas can buy the extra allowances as credits, privately or on the open market. By permitting allowances to be bought and sold, an operator can seek out the most cost-effective way of reducing its emissions, either by investing in ‘cleaner’ machinery and practices or by purchasing emissions from another operator who already has excess ‘capacity’. Banks can use the opportunity for financing machinery for protecting emissions, or for green projects which get certificates for their projects and sell to the companies which exceed their quota of emission and are ready to buy the certificates.…

    • 298 Words
    • 2 Pages
    Good Essays
    Read More
  • Better Essays

    Market Failure and Carbon Prices
    • 1039 Words
    • 5 Pages

    Market Failure and Carbon Prices

    Climate change has become an issue of global discussion and it is the result of market failure. The effects of the increasing volume of carbon dioxide and greenhouse gases on the global temperature have become a major environmental issue throughout the world. Carbon emissions worldwide need to be reduced in order to avoid serious climate change. To encourage companies to invest in cleaner technology and reduce carbon emissions, the government has to attach a cost to carbon emissions. There are a few approaches to limiting carbon emissions such as the cap-and-trade system and carbon tax (‘Good policy, and bad’ 2009). Government intervention can correct the distortions by market failure to improve economic efficiency. Hence, world leaders need to implement a carbon price in order to reduce the negative externalities which cause market failure.…

    • 1039 Words
    • 5 Pages
    Better Essays
    Read More
  • Powerful Essays

    Carbon Credit Accounting: Opportunities and Challenges
    • 2406 Words
    • 10 Pages

    Carbon Credit Accounting: Opportunities and Challenges

    References: 1. Bothra, N. & Kothari, V.; “Carbon Credits – Unravelling Regulatory, Taxation & Accounting Issues” (indiafinancing.com)…

    • 2406 Words
    • 10 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Carbon Credit
    • 4122 Words
    • 17 Pages

    Carbon Credit

    A carbon credit (often called a carbon offset) is a financial instrument that represents a tonne of CO2 (carbon dioxide) or CO2e (carbon dioxide equivalent gases) removed or reduced from the atmosphere from an emission reduction project, which can be used, by governments, industry or private individuals to offset damaging carbon emissions that they are generating.…

    • 4122 Words
    • 17 Pages
    Powerful Essays
    Read More

Related Topics