Carbon Derivatives Market in India

The world economy is a very complex system; in the system harmful externalities disrupt capital flows and determine economic productivity. Most notable of these externalities is inadvertent global warming. Spending towards research and regulation of climate change at both the national and international level are very important in determining current and future business trends. Economists and scientists worldwide continuously debate the pros and cons of emissions reduction and what consequences can quickly follow. Though many have different views on the issue, all can agree that the immediate and long term effects of climate change have become an economic matter of paramount importance. The sweeping impact from climate change will have important fiscal, financial, and macroeconomic ramifications that influence global commerce standards.

The cap on the market is set on carbon emissions, creating scarcity within the market. At the end of each year businesses within the scheme are required to ensure they have enough allowances to account for their installation’s actual emissions. Those firms that do not comply and pollute without sufficient permits are hit with heavy fines. (Euro 100 per ton). The aim of carbon trading is to create a market in pollution permits and put a price on carbon. In this way, policy can help internalise external costs of firms’ production and encourage lower emissions to tackle climate change. In a cap and trade system, the volume permits would gradually decline and total emissions, in theory, will diminish. The model of such can be shown as

Another form of carbon credit trading applies to companies. If a company is having difficulties in sticking to maximum allowable emissions amount, it can use its resources to invest in an emission reduction project. This project will be one that produces carbon offsets, which he company may use to cover the amount that was they could previously not.

Cap and trade is a cost-effective method for reducing greenhouse gas emission/pollution. The amount of emissions that are produced by the economy (cap) is limited and allows those insured by the cap to trade amongst themselves (trade) in a flexible and cost-effective method/manner, creating a price on carbon pollution. The "cap" sets a maximum limit on the amount of greenhouse gas pollution that regulated emitters collectively can produce. Each year, the cap is lowered, requiring industry and other greenhouse gas polluters, such as natural gas distributors and other fuel suppliers, to reduce their emissions. The "trade" refers to a market where companies can buy or sell “allowances,” or pay others to reduce emissions on their behalf, in

Cap-and-trade is a program which uses a market-based mechanism to control greenhouse gas emissions, the primary driver of global warming. The “cap” sets a limit on emissions, which is lowered over time to reduce the amount of pollutants released into the atmosphere. It limits emissions in electric power generation, natural gas, transportation, and large manufacturers. The “trade” creates a market for carbon allowances, leading to more cost-effective pollution cuts, and incentive to invest in cleaner technology. The less they emit, the less they pay, so it is in their economic incentive to pollute less. Each allowance (typically equivalent to one metric ton of carbon dioxide) are auctioned or allocated to regulated emitters on a regular basis.

Discharging taxes is the most effective way to limit the emission although it is difficult to monitor the volume of emission (Jayanthakumaran 2012, p.369). It is demonstrated (Rabe & Borick 2012) that carbon taxation might belong on a long list of worthy policy ideas that cannot be expected to survive translation on to real policy through political examine. Secondly, from the analysis of case study, carbon taxes system is the most efficient way to undertake the emission reduction. Because, under the cap-and-trade system, it is very difficult for regulators to check whether firms are obeying the systems effectively and regulators need to monitor large number of factories, this would lead to free permits.

Moreover, carbon and petroleum, compounds which produce large amounts of carbon emissions when burned, have accounted for more than half of the energy produced in 2013, while cleaner energy sources, such as solar and wind power, were reported as less than 10% of the produced energy (Adams). Developing countries, like China and India, play a huge role in the production. China alone contributed 27% of 2011’s total carbon emissions (Union). The process of modernization and the air pollution that this causes has led to uncontrollable environmental damage, in addition to a huge influx of health defects and pollution-related deaths.

First we should understand how the carbon cap and trade system came about. The system of carbon cap trade used to be known as ‘emissions trading’, the alliance of free-market republicans and renegade environmentalists got the system adopted as national law in 1990 as a part of the Clean Air Act, to control the power-plant pollutants that cause acid rain, which is triggered by vast clouds of sulfur dioxide

Carbon Capture and Storage (CCS) is a means of separating out carbon dioxide (CO2) when burning fossil fuels and then disposing of it either underground or at or under the sea bed. Australia’s concern for the environment is one reason for them wanting to contribute to the development of CCS. In addition they also have the wealth to be able to investigate and implement this technology. India and China, on the other hand, despite their phenomenal economic growth are still relatively new economies who perhaps do not have

Socolow and Stephen W. Pacala in their article, “A Plan to Keep Carbon In Check (2006)" suggests that “today’s notoriously inefficient energy system can be replaced if the world gives unprecedented attention to energy efficiency.” Taking steps to institute policies and be cost-efficient will entail structural change, but in the end will be in the best interest for countries to aid in the adaptation of lower carbon products and economic competitiveness. They further state that governments need “to stimulate the commercialization of low-carbon technologies” so there is less demand for fossil fuels thereby increasing “competitive options” for the future. (Socolow & Pacala, 2006) Consequently, the emissions of carbon dioxide into the atmosphere is causing the rise of global temperatures. Utilizing technology specifically for carbon capture and storage is crucial so we can slowly begin our process of adapting to other energy resources. It is also important that all countries participate in policies that will reduce emissions in a cost-effective

The purpose of the report is to present to the Senate Economics References Committee on carbon risk disclosure. Five areas which will have to be taken under consideration are current and emerging international carbon risk disclosure frameworks, current carbon risk disclosure practices within corporate Australia, Australian involvement in the G20 Financial Stability Board discussion on carbon risk impacts for financial stability, current regulatory and policy oversight of carbon risk disclosure across government agencies and other related matters using relevant scholarly research literature journals to support the contents of the report.

In Chinese proverb, “It coming from its people, should absolutely benefit the people.” It means although with a high ratepayer taxes, the government is able to use the taxes on the people. The rest of carbon revenue should spend on investment. Farms have plenty of sunlight for solar and biomass for burning. Diesel engines can be made to run off of plant oils. It is efficiency to replacing coal with clean energy for reduce the greenhouse gas emission. It could build wind turbines replace coal. It is more safely and reliably use the intermittent flow of electricity that comes form wind turbines. It will reward from invested new technology, even have high cost

BHP Billiton is the world’s top producers of major commodities. China, as BHP Billiton’s largest export market, demand strongly influences the BHP Billiton’s operation (Western Australian Iron Ore Industry Profile 2015). According to the annual report of BHP Billiton (2015), China brought about 36.6% revenue in the amount of total export revenue for BHP Billiton, among the largest product is Iron Ore, which was 66% in 2015. Meanwhile, the forecast of iron ore will continue to increase production. However, Chinese steel consumption may growth slow next few years (shows in figure 1) because the real estate industry decline (Mark 2015). Therefore, oversupply and weaker demand may create the fluctuations in commodity prices which related to commodity risk.

Since the government regulates how much emissions are allowed, emissions will never rise past their cap. Contrary to that, the carbon tax has a chance to incentivize emissions even lower than a set goal, but, there is no guarantee. Lower emissions mean cheaper everything, allowing for greater profit margins. Also, carbon taxes provide a broader scope in terms of emission reductions (Carbon Tax, Baumert). On the other hand, emissions trading systems would be more suited for all six GHG included in the Kyoto Protocol. Such systems have been already applied and have achieved success in low-cost SO2 emissions. Phase I units reduced SO¬¬¬2 by 57%, while phase II reduced the by 14% after 2000

Pollution, specifically global warming, is of growing concern to people and governments. It is a controversial issue whose validity is still being debated by scientists. The Kyoto Protocol is an international attempt to address global warming through emissions controls. Traditional neoclassical economic models do not incorporate pollution in rudimentary theories of supply, demand, or pricing, as a result, firms do not consider pollution as a cost of production, which leaves government regulation as the primary method for controlling these externalities. The goal of emissions trading is to allow one business, which can make greenhouse gas emission reductions for a relatively low cost, to sell