Question one
International treaties are an international agreement that were set up to deal with the climate change. They were adopted at the United Nations conference in the department of environment and development. It is called the Earth Summit which took place in 1992. The treaties are considered to have played a major role that lead to the existence of the Kyoto protocols. The Earth Summit has resulted in the creation of a variety of agreements for the protection of the environments. Australia stands out as the most active country in the ETS markets. The requirement to have electric generators and heavy consumers to buy NSW greenhouse reduction certificates (NGCs) was passed to reduce emissions in the Australia. European Union emission trading center happens to be the largest multinational greenhouse gas emissions trading scheme in the world. During the EU’s central policy, it was decided that the policy would act as an instrument to achieve the cap set in Kyoto Protocol.
Tokyo is another active country in ETS market which is considered as heavy energy consumer with its production equivalent to the 16th world’s largest country. The other country is the United States, which has had emission system and has been the SO2 trading system in the framework of Acid Rain program since 1990. Clean air act in the US that is essentially a cap and trade emission. South Korea officially launched the national emission trading scheme on 1 January 2015. It covers 525 entities from 23 sectors a three-year cap of 1.8687 billion tCO2e. That makes South Korea the second largest carbon market in the world after EU ETS. China is another active country in the ETS market after approving a pilot project to test trading of carbon in seven provinces and cities. India has set to begin in 2014 after a three-year rollout period it covers eight sectors which is responsible for 54 percent of industrials consumption energy in India (William 2011).
The Kyoto protocol inspired the performance of EU ETS and for the first three years from 2005 to 2007 the process was a trial. For better understanding of the trial, the trial period had to be accomplished. It was mandated to develop primarily infrastructure and to lay the foundation of experience. That would help in the successful use of cap and trade system while reducing European GHG emission during second period of trading. The 2008-12 brought the Kyoto Protocol first commitment period. The Co2 tradable prices widely acceptable emission allowances emerged by January 1, 2005.
Question two
The functioning market has developed quickly and effortlessly without Commission or member states government prodding. The cap-and-trade facilities have been put in place with every industry in EU involving the price of CO2 emissions in their everyday production decision. In CDM Certified Emission Reduction or CER, 1CER =1tonne of CO2 equivalent to the projects in the pipeline. As by August 2008-3700 projects (2.71 CER billion) which include 1,133 projects (1.32 billion CERs) that are registered. Article 11a of instruction 2003/87/EC gives the use of CERs and ERUs from project activities. That is before entry into force of an international agreement on climate change for operators to possibly exchange units against allowances. EU ETS was the first largest and remains the most significant greenhouse gas trading emission. It was launched 2005 to combat climate change and happens to be the major pillar of climate.
CERs heavily dominate the Kyoto compliant because they are the Kyoto units that relate to the clean development mechanism. According to Kyoto protocol, the pure mechanism development allows countries in Annex 1 to claim credit for projects that reduce emission in non-Annex1 countries.
Question three
The ERUs markets were valid as from 2008 and for CERs it relatively active given the level of activities in European Union’s Emissions trading scheme. According to the mechanism defined under the Kyoto protocol the price was intended to be lower to reduce overall costs in achieving the carbon emission targets. The cost of limiting emissions varies from country to another, and the benefit of the atmosphere is the same in principle. The Kyoto protocol program did drive up the permit that had remained according to the law of demand which raises the price of the ETS. The price has been rising off late due to the many protocols that have been created to reduce environmental pollution. The amount as at present for the carbon is uncertain due to ETS cap. The price was at its peak in 2006 as compared to the 2014. The reason being that from 2013 marked the start of the third phase of carbon emissions. Also considering the unstable prices in the market reduced the amount of carbon in major countries. The EU has mitigated the oversupply by backloading or delaying until 2019.
Question four
There is the process of establishing a market stability reserve to shore up the future market. It creates confidence that the supply would not built up excessively. There is a lack of competitive conditions in markets, access constraints on the use, and the availability of CERs and uncertainty surrounding CERs. The risk of default in the financial institutions that guarantee secondary CERs can be considered as the key factors affecting the spread of factors between EUAs and CERs.
Question five
The carbon market comprises of compliance market organizations that voluntarily reduce their carbon emissions. An efficient international carbon market would reduce GHG emissions at the lowest cost, and it allows polluters who cannot abate their emissions cheaply to invest globally in projects. There is voluntary carbon market that is an entity volunteering to offset their emissions by buying carbon credits that reduce the level of carbon released to the atmosphere. The company does that with the desire to demonstrate leadership Etienne and Weiler (2005). In the Kyoto protocol pre-date the market is deep due to the efforts many involved countries are putting into place to reduce environment pollution. The issues are global Thus the introduction of Kyoto Protocol and the Marrakesh Accords signifies the deep market. The factors affecting the fluctuation of prices in the market of carbon are free allocation. Where the higher the free allocation, the cheaper the price of carbon as only a few allowances needs to be bought. Another factor is banking of allowances where allowances are purchased and stored to be used in the future when the prices would likely be higher. The third factor is the economy, the greater means of emissions, the higher the need for allowances. The global economy crisis that happens in 2008 made the price of carbon to fall dramatically. The offset is another reason where the percentage of emissions that can be covered by international offsets is one issue, and the price of offset is another issue. In such markets, the price fluctuates with the enormous amount.
Question six
The key players in the carbon market are the EU members and the Tokyo who are also the largest producers of carbon. They form the international ground for the carbon market. Carbon selling and buying can be divided into two the carbon credit and carbon offset Massai (2011). The carbon credit is being sold by different carbons dealers selling to commercial and individual users. The carbon offseters buy the credits from an investment fund or carbon development company that as aggregated the credits from individual projects. The buyers and sellers of carbon can use exchange platform to run a business such as carbon trade exchange. Wind energy companies often sell carbon offset.
Question seven
There is the need for regulation because the production of carbon has adverse effects on the environment thus failure to regulate would lead to damage to the environment. There is a need to regulate or oversight to help control the emission of gasses and to regulate the market and stabilize prices for the carbon.
Question eight
In my opinion, the Kyoto Protocol and the Marrakesh Accords should be revisited. The members that created the Kyoto Protocol and the Marrakesh Accords that goes against the articles that would have agreed upon they should pay fine. The production of carbon should be controlled to reduce whether pollution that is caused by the carbon. That is being produced by the leading companies. Any country that wishes to start carbon production should be able to deal with the outcome of the production without interfering with their neighboring countries. The countries that are into carbon production should join the traded caps for reinforce accountability.
Bibliography
Dudley, William. The Environment. Farmington Hills, MI: Green haven Press, 2006.
Massai, L. The Kyoto Protocol in the EU European Community and Member States under International and European Law. The Hague: T.M.C. Asser Press, 2011.
Vermeersch, Etienne, and Raoul Weiler. Reading the Kyoto Protocol: Ethical Aspects of the Convention on Climate Change. Delft: Eburon, 2005.
