Twenty-first Century Skill: Trading Carbon CreditsPublished:
| June 8, 2011
| Julia Hanna
Cap and trade has become an increasingly popular mechanism which is used by governments to increase green behavior and to cut corporate pollution. this article told, the students at Harvard Business School use a simulation to learn how it works and includes an interview with professor Peter Coles. In industries it’s really important to know how cap and trade Works and because of that a Harvard Business School professor, Peter Coles, gives his students an opportunity to experience the carbon trading simulation. He has used the simulation in the elective course “Managing Networked Businesses and the doctoral course Market Design”.The basic concept is a cap which is set on carbon emissions. Students are wanted to try to rise profits with clean technologies. So that we can say the simulation provides a classroom experience for students to see the impact of different design principles in the cap-and-trade mechanism.
At first nobody knows what the appropriate permit price is so they are in an unknowledge and fort his situation, Coles says, "Those who make poor choices feel the consequences of price uncertainty most deeply".
One of the cement factory managers begins with no permits. While that may seem unfair, it's a condition that mirrors real life. "Typically, these permits are grandfathered," Coles says. "They go to incumbent firms with the best lobbyists, while the new guy faces an uphill battle." Sometimes groups will find that the price drops to zero, upsetting students who are stuck with suddenly worthless permits. In other instances, the price rises dramatically. "Both extremes offer useful discussion points," says Coles, noting that the Europe Union experienced a price collapse in 2006 that called the stability of the entire market into question. "As a class we can talk about whether a price collapse is really a problem, and if so, what can we do to...
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