Carbon Trade Trends

Topics: Emissions trading, Kyoto Protocol, Carbon credit Pages: 8 (4651 words) Published: November 3, 2014
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, 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 global warming is what the critics say, as carbon trade is affected by price fluctuations, speculations etc. Countries should have the objective of emission reductions without expectation of any monetary benefits. Carbon trade has several shortcomings such as uncertainty, voluntary nature, inadequate controls etc. which can be overcome by framing appropriate regulations and creating a body powerful enough to administer the same. Objectives of the research To understand what is carbon trade and study its trend over the years To study its impact on economy and estimate its probable effect on the future economy To study the environmental pros cons of carbon trade To catch a glimpse of the major players in the carbon trade industry To understand the accounting aspect of carbon trade Methodology An in-depth study of papers published by well-known organizations like the World Bank, KPMG etc. was conducted. Primary data was collected from two business houses engaged in carbon trade vide questionnaires, personal interviews and review of published financial statements. Views and opinions of experts in the field of economics, ecology, accountancy and finance were obtained. With the background obtained from the in-depth study, an analysis of the primary data collected and the views and opinions obtained, was performed. Conclusions were arrived at from the above analysis. Possible ways and means to exploit carbon trade for the betterment of the economy and environment are suggested. Introduction Ever since the Industrial Revolution of the eighteenth century, the proportion of the green house gases in the atmosphere has been on the incline. Crave for a higher standard of living combined with consumerism and materialism had resulted in an alarming increase in the level of these gases especially in the latter part of the twentieth century. This has led to global warming and climate change which manifest in the form of increasing sea-levels, melting polar ice and...
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