Carbon trading-a new mantra in financial services

2014

Carbon dioxide (CO2) emissions in our atmosphere have been increasing steadily due to the burning of fossil fuels such as coal, gas and oil, etc. CO2 being a Greenhouse Gas (GHG) has contributed to global warming resulting in the melting of polar ice caps and glaciers leading to a rise in the sea levels and finally culminating in the submerging of coastal and low-level areas all around the world. Thus, with the intention of controlling global warming and the rising CO2 emissions, the Kyoto Protocol was set up in 2005 to compel the developed countries to lower their greenhouse gas (GHG) emissions thus giving rise to the concept of carbon credits, devised to reduce global carbon emission levels. However, the first phase of the sole international agreement to cut GHG emissions came to an end in 2012. The Kyoto Protocol has not been qualified as an absolute success seeing that it has not produced any demonstrable reduction in emission levels, and global temperatures are still rising at ...

2000

UBS integrates environmental aspects into its various banking activities (commercial banking, asset management and investment banking). For many of our clients, environmental considerations not only represent financial risks, they also mean new business opportunities. This paper highlights UBS' efforts to explore possible environmental market o#n-tunities resulting from the increasingly signaficant impact of global climate policies on the banking business. A careful analysis of the Kyoto Protocol-the international agreement to control global warming by reducing emissions of greenhouse gases-and its impact on thefinancial sector has led UBS to assess the new market potentialfor a climate value investment product. In this article, the authors describe thepremises behind such an investment vehicle as well as the most important steps and criteria needed for setting up the project portfolio. In addition, besides clatifiing the most significant operational modalities of such an investment poduct, this paper also explains the importance of being an early mover in the greenhouse gas reduction market.

2009

Financial market information can provide an objective assessment of expected losses due to global warming. In a Merton-type asset pricing model, with asset prices affected by changes in investment opportunities caused by global warming, the risk premium is significantly negative and growing over time, loadings for most assets are negative, and asset portfolios in more vulnerable industries have stronger negative loadings on the global warming factor. Required returns are 0.11 percent higher due to global warming, implying a present value loss of 4.18 percent of wealth. These costs complement and exceed previous estimates of the cost of global warming.

Project Syndicate, January 29, 2015, 2015

Journal of Economics and Sustainable Development, 2020

Finance scholars are only recently attempting to bridge the gap in climate finance. This paper is essentially a literature review of the interaction of climate change and finance through the lens of financial theory. The demand for financing climate-resilient infrastructures such as clean energy projects, energy-efficient buildings, low-carbon transportation, water, waste management systems, and the supply side of financing these infrastructures was reviewed. Financial theories and frameworks such as the Modigliani and Miller theorem, capital asset pricing model (CAPM), option pricing, efficient market hypothesis, and agency theory were also amenable to analyzing climate change and finance problems. Specifically, the factors to consider when financing and funding climateresilient infrastructure include the financing profile of the investment; potential for cost recovery from users; the extent to which quality is contractible; the level of uncertainty and complexity of the project and policy frameworks; financial market conditions; and optimal allocation of risks. As data collection improves, climate finance research can continue on a great ride with enormous benefits to the global community.

Preventing dangerous climate change is essential for global security and prosperity. All countries will be affected by the impacts of climate change, particularly developing countries. Global warming is the main reason behind the climate change and it is the greatest threats that the world faces. This would have very serious consequences, both environmentally and economically. The international community will need to use the full range of policy tools at its disposal to bring about immediate and substantial reductions in carbon dioxide and other greenhouse gas emissions. These tools should be environmentally effective, economically efficient and equitable between and within countries. The costs of not acting to tackle climate change are far greater than the costs of action. Countries should use other policy tools alongside carbon credit as appropriate for their circumstances.

World Trade Review, 2010

2018

British Actuarial Journal, 2022

This paper illustrates the potential impacts of climate change on financial markets, focusing on their long-term significance. It uses a top-down modelling tool developed by Ortec Finance in partnership with Cambridge Econometrics that combines climate science with macro-economic and financial effects to examine the possible impacts of three plausible (not extreme) climate pathways. The paper first considers the impact on gross domestic product (GDP), finding that GDP is lower in all three pathways, with the most severe reduction in the Failed Transition Pathway where the Paris Agreement climate targets are not met. The model then translates these GDP impacts into financial market effects. In the Failed Transition Pathway, cumulative global equity returns are approximately 50% lower over the period 2020–2060 than in the climate-uninformed base case. For the other two pathways where the Paris Agreement targets are met, the corresponding figures are 15% and 25% lower returns than in t...

Journal of Industrial and Business Economics, 2020

Carbon Trading to Combat Climate Change, 2022

Global climate change has negative effects, on impoverished individuals and poor countries are more severely affected than others. They are particularly at risk due to their heavy reliance on natural resources and poor ability to adapt to climatic change upshots. However, by lowering carbon emissions, carbon trading systems should enhance the environment's air quality and sustenance. The amount of greenhouse gases in the atmosphere is more dependent on human activity, making it easier to govern and control. The main organic sources of greenhouse gases are biomass decomposition, natural fires, and biological respiration. Anthropogenic greenhouse gas emissions increase the Earth's natural greenhouse effect and cause global warming by trapping outgoing infrared radiation within the atmosphere due to the formed pseudo blanket. Global warming impacts humans, plants and animals via a variety of mechanisms with varying levels of complexity, directness, and timing. The negative effects of climate change may be mitigated through adaptation, but this option must be carefully considered given that developing nations are clearly at a disadvantage in terms of technology, resources, and institutional capacity. The capacity to adapt is particularly related to socioeconomic characteristics.

Law and Financial Markets Review, 2016

It is global in its causes and consequences. . The impacts of climate change are long-term and persistent. . Uncertainties and risks in the economic impacts are pervasive. . There is a serious risk of major, irreversible change with non-marginal economic effects. 3

One Earth

The Journal of Risk Finance, 2003

A new instrument for hedging weather risks has made its appearance in the financial arena. Trade in 'weather derivatives' has taken off in the US, and interest is growing elsewhere. Whilst such contracts may be simply interpreted as a new tool for solving a historical problem, the question addressed in this paper is if, besides other factors, the appearance of weather derivatives is somehow related to anthropogenic climate change. Our tentative answer is positive. Since 'global warming' does not simply mean an increase in averaged temperatures, but increased climate variability, and increased frequency and magnitude of weather extremes, derivative contracts may potentially become a useful tool for hedging some weather risks, insofar as they may provide coverage at a lower cost than standard insurance schemes.

These IGCC reports examine climate change risks and adaptation opportunities as well as energy cost and carbon risks and mitigation opportunities for four industry sectors. Designed as guides for funds managers, ESG analysts and company analysts, the reports provide a first time, comprehensive analysis of climate change issues for integration into company analysis and engagement. The reports will help investors go beyond assessing disclosure practices and carbon prices in their analysis of climate change exposure. Developed by lead author Dr Michael Smith of the Fenner School the Australian National University, in conjunction with IGCC’s Research Working Group. Cbus sponsored the development of these reports. These reports were a) aunched at the major annual conference for superfunds, b) receiving national media coverage and now c) are promoted by the Investor Group on Climate Change here @ http://www.igcc.org.au/assessing_risks