Download Regulation on Carbon Emission Trading Pricing-to-Market: Based on

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Regulation on Carbon Emission Trading Pricing-to-Market: Based on
the Comparison Between USA. and EU
DONG Yan1, 2
1. School of Civil, Commercial and Economic Laws, China University of Political Science and Law,
China, 100088
2. School of Humanities and Societies, University of Petroleum (East China), China, 257061
[email protected]
Abstract: The regulations on carbon trading in USA and EU help states to master pricing-to-market
both in domestic markets and international carbon markets, by means of carrying out legal
collaborations of greenhouse gas trading and constructing the whole orders of domestic carbon trading
markets. The consensus which developed countries have been reached in the course of price regulations
of carbon trading include such aspects as legislative constructions of carbon trading market systems,
effective supervisions on the basis of cost-and-benefit analyses, tool support of financial innovations and
future establishments of global carbon trading markets.
Keywords: Reduction of emissions, Carbon trading, Trade cost, Price regulation
1 Introduction
In recent years, carbon trading has been valued by most countries to cope with the increasing serious
climate change challenges. As an effective way to reduce carbon emissions, carbon trading can
indirectly supply an incentive to guide carbon reductions by carbon prices which are fundamentally
decided by carbon trading pricing-to-market. Moreover, carbon trading pricing-to-market is closely
related to supervisions and regulations of carbon market. So USA and EU have successively regulated
the carbon trading price by means of legislations and reforms of supervisions and regulations. The
regulations can help states to master carbon pricing-to-market both in domestic markets and in
international markets, while carrying out legal cooperation on GHG trading and constructing whole
orders of domestic carbon trading markets, in order to improve capacities of taking part in carbon price
negotiation, which may reflect values of carbon assets. Furthermore, price forming mechanisms can
reflect real-time variations influenced by supply side and demand side in carbon markets, when carbon
emission rights are regarded as the unusual property rights. On that account, launching the comparative
research between USA and EU on the carbon trading forming price mechanisms and generalizing
common experiences of carbon market reform practices, have important practical meanings for legal
price regulation of carbon trading.
2 Legal Price Regulation of USA. Carbon Trading in Compliance of Non-Kyoto
Reduction
As the largest GHG emitter, America dropped out the Kyoto Protocol in 2001. The outstanding
contribution is attributed to introduction of three Kyoto mechanisms to cope with environmental
problems triggered by climate change. America has established domestic regional carbon trading market
mechanisms in accordance with successful practices, in spite of absence of direct global GHG reduction
participation promoted by compliance of Kyoto Protocol.
2.1 Total amount control is legal foundation of disposition of property of American carbon trading
As the first systematic private platform about GHG reduction trading, Chicago Climate Exchange was
set up in 2003. It is a blend of mandatory market and voluntary market. So-called “voluntary” refers to
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counterpart that such entities as states or enterprises assume the statutory liabilities in the Kyoto
mechanism. Carbon trading can be classified into two sorts. One is JI and CDM which are both based on
the projects, the other is IET on the basis of distributed quotas. Carbon emission rights can be transacted
as intangible property after the verified procedures of strict registrations, supervisions and reduction
certifications. In order to attract such stakeholders as enterprises, intermediary organs and financial
organs to invest carbon markets, America’s government encourage the entity to transact in the on-site
exchange by means of signing voluntary contracts. In view of social responsibilities and cultural brand,
enterprises are bind to legal reduction of carbon emissions by concluding contracts with American
Environment Protection Agency (EPA). EPA can have the legislative authorities of regulating carbon
dioxide emission right, in accordance with Massachusetts v. EPA, 127 S. Ct. 1438 (2007) classic
precedent decided by Supreme Court on April 2, 2007. [1]The authority that carbon dioxide is regarded
as pollutants ruled by Clean Air Act justified the power of EPA regulations including impose total
amount control on reductions requirements based on voluntary contracts. California’s Greenhouse Gas
Solutions Act of 2006 (“Assembly Bill 32”) which will be enforced in 2012, is intended to reduce
emissions to 1990 state levels by 2020 and employ a cap-and-trade approach. The Regional Greenhouse
Gas Initiatives (“RGGI”) among 10 northeast states came into effect on January 1, 2009, aiming at limit
GHG emission from power sector source. West Climate Initiatives (“WCI”) introduced by 7 west states
in USA and 3 provinces in Canada in 2010, will be intended to establish a uniform carbon emission
market with 1 billion carbon credits per year when completely implemented. When coming into effect in
2012, WCI can make the carbon market as the second largest market all over the world, which will be
half of European Union Emission Trading System (“EU ETS”) in the same year.
American Clean Energy and Security Act of 2009 (Assembly Bill 2454) passed by the House of
Representatives on June 26, 2009, is intended to establish a uniform, high-efficient, transparent
cap-and-trade system and reduce GHG emission step by step. The timetable is to reduce 3% in 2012,
17% in 2020, 42% in 2030, 83% in 2050, from the GHG emission level of 2005. Facilities responsible
for about 85% of U.S. emissions are under the cap, including power plants, refineries, and industrial
plants emitting at least 25,000 tons of carbon dioxide per year. Furthermore, not later than 1 year after
the date of enactment of this title, the Administrator shall offer to enter into a contract with the National
Academy of Sciences (in this section referred to as the “Academy”) under which the Academy shall, not
later than July 1, 2014, and every 4 years thereafter, submit to Congress and the Administrator a report
on GHG emission reduction. The scientific and reasonable cost and risk review is crucial for systematic
designations of carbon trading markets, taking total amount control (or cited as “cap”) into
consideration.
2.2 Original allocations of carbon emission rights are systematic premise of carbon trading
efficiency
Original allocations of carbon emission rights have two forms that one is free distribution, the other is
auction. The former which can be called “grandfather distribution” distribute carbon emission credits to
every entity on the basis of the enterprise’s historical emissions or corresponding verified data and if the
historical data can not available, the current emissions can be deduced verified. The latter is intended
that entities can purchase certain emission credits which constitute the enterprises the total intangible
assets. [2]Marketing allowances can contribute to the reduction of carbon emissions. The profits are the
sources of carbon trust applicable to promote and encourage carbon trading, but the negative effects
include the cost of production will be enhanced and some superior enterprises may manipulate the
carbon prices by means of their own market monopoly status. The setbacks of free distribution method
that administrator distribute carbon credits among the entities freely with public authorities, may lead to
power rent-seeking that administrator can make plots with enterprises, forming the interest communities,
and impose the restrictions on new market participators. American voluntary carbon trading can
combine two methods comprehensively. EPA figures out every year carbon emission amounts in
2012-2050, and some are distributed freely, the rest are auctioned. The rules are required that the
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proportion of auctions will come to 21.5%, till 2012 and 69.5% in 2031-2050. [3]
In accordance with American Clean Energy and Security Act of 2009, on the one hand National Climate
Change Adaptation Program should be drafted, targeting indicating global climate change which
triggered by nature and human beings in the course of acknowledgement, prediction and response for
U.S and other states in the world. Establish the Center of National Climate Service to enhance the
understanding of varieties of Climate and different global state regional aspects. On the other hand,
American national prime government should draft the International Climate Change Adaptation
Program accompany with Environmental Protection Agency, Financial Ministry and others, in order to
guide the allocations of emission rights, and implement the program by providing bilateral aid, setting
up multilateral trust, signing international conventions in guidance of international organizations or
adopting complicated mechanisms.
2.3 Quantity certifications and supervisions of carbon emission rights are core issues of cost
assessments for American carbon trading markets
With the emergence of new market, the leakage of the system will be unavoidable in the course of
practices, and the trading cost will be enhanced to influence the market efficiencies. So quantity
certifications and supervisions of carbon emission rights are core elements that achieve market values
and efficiencies. Carbon trading prices are dependent on supplies and demands in carbon trading
markets. American Clean Energy and Security Act of 2009 subscribe the designation, registration and
offsets of greenhouse gases. Greenhouse gases mainly include carbon dioxide, methane, nitrous oxide,
sulfur hexafluoride, hydrofluorocarbons emitted from a chemical manufacturing process at an industrial
stationary source, any perfluorocarbon, nitrogen trifluoride, any other anthropogenic gas designated as a
greenhouse gas by the Administrator under this section. Any one can petition Administer to designate as
a greenhouse gas any anthropogenic gas 1 metric ton of which makes the same or greater contribution to
global warming over 100 years as 1 metric ton of carbon dioxide. The petitioner shall provide sufficient
data, as specified by rule by the Administrator, to demonstrate that the gas is likely to be designated as a
greenhouse gas and is likely to be produced, imported, used, or emitted in the United States. To the
extent practicable, the petitioner shall also identify producers, importers, distributors, users, and emitters
of the gas in the United States. Not later than 30 days after the date of enactment of this title, the
Administrator shall establish an independent Offsets Integrity Advisory Board. The Advisory Board
shall make recommendations to the Administrator for use in promulgating and revising regulations, and
offset credits to reduce emission costs, put 2 billion tons per year that 1billion credits are from domestic
projects, the rest from oversea projects, and reduce to 0.8 billion tons per year. Since 2017, American
entities which hold international carbon offset credits should offset 4 tons carbon emissions by 5 tons
international offset credits.
Consequently the effectiveness of American carbon market mainly includes three aspects: Firstly,
emission standard baseline reflects the economic endurance; secondly, effective regulators and tools
entail the regulation; thirdly, emissions should be successively verified. They need the participations of
agencies, industry associations and exchanges. For instance, Chicago Climate Exchange explored an
Internet set of electric trade platform used by entities in carbon emission trading. Any activity should be
achieved on site, and the course and data can be recorded timely. According to the trade price and trade
quantities per month, the exchange issues carbon trading report monthly to disclosure relevant market
information to supply the economic data for regulators.
2.4 The financial innovations of carbon emission rights are tools supporting American carbon
pricing mechanism
Recently, America has adjusted unilateral policies on clean energy, seeking international energy
collaborations positively, in order to control the carbon pricing among fiercely competitive carbon
markets. Chicago Climate Exchange which counts price by dollar and Chicago Climate Future
Exchange which introduced environmental financial derivatives make international collaborations of
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carbon finances on the basis of self financial innovations. CCX has become the second largest carbon
sink market in the world, and the unique greenhouse gas reduction trade market. CCX set up its branch
Europe Climate exchange in 2004, and made friends with India Business Exchange in 2005, then
establish Montreal Climate Exchange in Canada. In 2008, New York Euronext Group and French
State-owned Banks, Trust and Investment Banks set up BlueNext Environment Exchange, integrating
resource advantages and advanced market experiences with carbon financial advantages. Transaction
types in BlueNext Environment Exchange which has become the largest carbon credits market in the
world refer to spot goods and future goods such as EUA and CER. Financial market can support the
carbon trading, playing a role in the guidance of energy conservation and emission reduction. As the
member of CCX, American Bank will take part in CCFE and ECX. Furthermore, American Bank
established a joint ventures accompanying with CCX and Climate Enterprise which is the controlling
shareholder of ECX, and contribute 10,000,000 $ to become a stakeholder of joint ventures with the
identity of Strategic investors, then explored carbon financial merchandises and services. Furthermore,
American Bank enhanced current greenhouse gas reduction target and offered liquid support to CCX,
ECX and CCFE, and not more than three years will purchase 500,000 tons carbon credits issued by
CCX. [4] So American environmental financial innovational subjects include the prosperities of carbon
markets, participations of institutional investors and venture investments, financial innovations launched
by business banks.
3 Legal Price Regulation of EU Carbon Trading in Compliance of Kyoto
Framework
3.1 Implement Kyoto Protocol, positively promote post-Kyoto negotiation process and seize the
height of global carbon markets
European parliament and European council passed Directive 2003/87/EC which established greenhouse
gas emission trading system taking into effect on January 1, 2005. Contracting parties which are
countries of annex 1 and have authorized protocol, successively lay down own climate change strategies
and domestic emission reduction policies. Other contracting parties such as China which are not
countries of annex 1 have taken part in global carbon market by means of CDM and JI projects
operation. Countries of annex 1 can acquire the carbon allowances by transferring advanced techniques
of energy conservation and emission reduction in the carbon reduction projects. According to the
analysis of global carbon market, EU has become the largest buyer in the project operation and taken
priorities over other nations to form the buyer’s carbon market. EU has always played a active role in
promoting GHG reduction at policy and initiatives. In October, 2007 EU first put forward the target that
members of EU should reduce GHG gas by 20% on the basis of emissions in 1990 till 2020. On January
23, 2008 EU delivered the initiatives and the contents are as follows: I) broaden EU ETS and reduce
GHG gas by 20% on the basis of emissions in 2005 till 2020; II) set up target, that reduce GHG gas by
10% on the basis of emissions in 2005 till 2020, for the sectors out of EU ETS such as transportations
and building industry; III) set up binding renewable energy development target in terms of separate
member nation conditions, that the proportion of EU renewable energy comes to 20% till 2020(8.5 at
present); IV) improve the energy efficiency and save energy consumption by 20% till 2020; V)
formulate new rules to promote the carbon capture and sequestration(CCS) techniques and applications
of market means such as environmental tax.
On January 28, 2009 European Commission issued Copenhagen Climate Change Comprehensive
Agreement (SEC(2009)101 SEC(2009)102) after negotiated with European Parliament, European
Council and European Economic and Social Commission. Compared with Kyoto Protocol, great
changes can be reflected by the idea that to combine emission reduction with economic recovery to
pursue long term economic environmental sustainable development. New official ideas delegated the
main principle of EU, who attended Copenhagen Climate Change Congress in the end of 2009. The idea
referred to post-2012 reduction target, technique and capital, construction of carbon market. EU has
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pioneer experience on establishing emission trading system which act as the largest carbon market. EU
should promote the process of constructing great carbon market among the Organization for Economic
Cooperation and Development(OECD) before 2015, and extend the market to the developing countries
whose economy is developed. Copenhagen Agreement should assure developed countries of emission
reduction promises. So EU has set a good example in the world, due to promising to reduce GHG gas by
20% on the basis of emissions in 1990 till 2020. This is the most ambitious promise for post-2012
emission reduction among the nations. Provided that other developed countries can achieve the same
scale reduction and the developing countries whose economy is developed can also make proper
contributions with the range of capabilities and liabilities, EU will devote to working hard and
authorized 30% target under the ambitious and comprehensive international agreement framework.
3.2 According to the carbon emission allocation program for member country, EU ETS should be
regulated
EU ETS is main carbon market adjustment system to achieve EU emission reduction target. Compared
with American emission reduction strategy, climate change strategy of EU referred that EU confirmed
the reduction target and allocate agreements for member countries, guaranteed the member country
emission, then member state lay down native allocation plan for domestic enterprises. If enterprises
reduce carbon emission by improving the techniques, the rest allowances can be sold for other
enterprises, to encourage them to perform clean production. Carbon emission rights are deemed as rare
resources and Directive 2003/87/EC detailed in some aspects such as applicable scope, licenses and
allowances, implementations, supervisions, report and verification, registration, temporary exit, joint,
force majeure. Because EU legislations must be implemented by means of member state domestic
legislations, domestic allocation plans can be core tasks to implement EU ETS. Domestic allocation
plans not only ascertain total amount upper limit, but also list substantial covered inventory. What’s
more, allowances distributed each sector or enterprise in certain promising period should be ascertained.
Allowances distribution imposes crucial influence on carbon supply and demand, and allowances which
possess values are distributed freely to some extent. Equity should be upheld because allowances
allocations influence enterprise’s action. And enterprise which acquired inadequate allowances had to
purchase in the carbon market, while enterprise which acquired excessive allowances would become
seller. Allowances distribution can not easily controlled in reality because of different states economic
conditions. In fact, carbon emission rights were generously distributed and the allowances which
enterprise acquired surpass the reasonable upper limit. The world wildlife fund concluded that those
practices would cause carbon credits inflations and the credits price would be lowered, then the
effectiveness and reduction benefits of carbon markets would be weakened.
On April 23, 2009, European Commission passed Greenhouse Gas Emission Trade Directive and
rectified Directive 2003/87/EC. In order to guarantee the equity of carbon emission credits distributions,
member states should adopt auction in place of grandfather distribution. According to Copenhagen
Climate Change Comprehensive Agreement, the crucial parameters are as follows: (I) Gross domestic
product (GDP) per capita: reflect the capabilities of paying domestic reduction costs and those of buying
carbon credits from developing countries; (II) Unit of gross domestic product of GHG emissions: reflect
the potential of domestic GHG reduction; (III) the GHG emission trends from 1990 to 2005: start
domestic reduction initiatives in advance; (IV) population trends from 1990 to 2005: consider the
relationships between the population scale and total amounts of GHG emissions.
3.3 On the aspect of carbon currency, EU can promote financial services and expand the influence
to the world, challenge the American priority in the global financial market with the means of
euro which can control the carbon pricing
EU positively implemented climate change policies and promote the carbon trading, so carbon finance
are rapidly developed and financial assets based on Euros are expanding with the carbon trade turnover
enhanced. WTO created world tangible commodities trade systems, while Tokyo Protocol form
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intangible commodities trade systems characterized that carbon credits are regarded as products in the
global market. According to the classic doctrines of commodity transaction currency, the choice of
carbon trade currency was mainly influenced by three elements: carbon market share, perfect degree of
financial markets, and the differences of carbon credits.
First, EU carbon market share takes advantages over other states in the Kyoto mechanisms of global
carbon markets. In 2007, the transactions volume came to 161.5 billion tons which held 62% of the
global carbon transaction volume, business turnover came to 28 billion euro which held 70% of the
global carbon transaction turnover. ETS set two implementing stage: the first stage includes 2005-2007,
carbon emissions for high energy industrial sectors such as powers held 44% of the Europe total
emissions. European Commission gives 2219.8 billion EUAs to 27 member states. The second stage is
2008-2012, this coincides with Tokyo Protocol. Allowances of the second stage are reduced comparing
with those of the first stage. And the upper limit is 2019.8 billion EUAs per year. Because of every
state’s uneven economic conditions, reduction cost is different, allowances can be not equivalent, so the
fluidity is necessary for EUAs. Trades among developed countries are usually invoiced by exporting
country. Carbon trading based on EU ETS is limited to the EU member states, so euro can be invoice
currency.
Second, the EU has perfect carbon financial markets. EU ETS main carbon emissions exchanges include
European climate exchange (ECX), European energy exchange (EEX), and environmental exchange
(Bluenext), etc. ECX mainly referred to EUA spot transactions, cash transaction price of EUA was
published every day. And ECX is new-style carbon financial tools -- -- EUA futures, options, main trade
transactions leading varieties of 2005-2012 every year December delivery EUA contracts. In 2007, ECX
trade 400 million EUA futures the average daily, was the biggest exchanges in Europe. The six major
trading centers all used euro price.
Third, as EU carbon emissions trading objects, compared with CERs and ERUs, EUAs risks are lowest,
but prices are the highest, generally, 18-25 euro in between. There are differences on market evaluations
between carbon credits based on the quotas and carbon credits based on the projects. CERs which
developed countries acquire through investing CDM, are the first long-term contract, and do not
guarantee delivery. The buyer will assume risks of future project registration defects or impossible to
provide adequate reduction credits. But for those difficult to implement the abatement projects, the seller
bargaining power will be limited. In addition, carbon credits buyers will consider scale of entities,
credibility of business partners, expectation of monitoring procedures to offer higher but also more
reasonable contract price.[5]
4 Basic Experiences of the United States and the EU Carbon Trading Pricing
Laws and Regulations
4.1 Legislative construction: establish domestic legislation or regional carbon trading system
The United States and the European Union's practical experiences show that the most important
systematic premise of regulating carbon prices refers to confirm the properties attributes of carbon
emissions and reasonable configuration of rights and liabilities, constructing domestic regional carbon
trading market system. Greenhouse gas emissions trading system elements include market participants,
quota allocation, verification and report, registration with the transaction rules, construction of the
trading platform, etc. Flexible market mechanism and voluntary participation, through economic
incentives, attract numerous enterprises and intermediary agencies, expand the market scale and control
enterprise costs of reducing emissions. The core content of carbon trading system refers to make cost of
externality internal, and to transform externalities which need not pay any cost into scarce resources
through systematic designs. As the effective method of the price regulations of carbon trading, compared
to carbon tax, carbon trading pays more attention to the quantity in the control, but the cost is difficult to
determine, and it varies with the reduction of the cost and emission levels. When excessive carbon
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emissions urgently need to be controlled, carbon trading functions well. Distribution mode of total
amount control and carbon emissions rights are the key elements in the process of building system,
which refer to fairness and efficiency of carbon trading system operation. European and American
countries practices had proved that if the two keys were not better considered, trade cost would increase.
Carbon emissions trading can correct the market failure by the pricing, the enterprise will be forced to
pay the environmental externalities production cost. In the process of constructing carbon trading system,
market and governmental regulation and social participations in three, use the Coarse Theorem, around
the property confirmation, reducing transaction costs and building price forming mechanism, to realize
the system maximum performance.
4.2 The governmental supervision: regulation reform of carbon trading market
Carbon trading system to realize the performance is closely related with effective supervision of carbon
trading market. As the most major supervision method, cost-benefit analysis includes the identification
and classification of cost and benefit, converting risk into cost, the quantification of cost-benefit and the
application assessment and submitting cost-benefit information. Whether U.S. domestic carbon market
supervision or the EU member states assessments of carbon market system, is all through flexible and
steady, transparent public decision-making process and judicial review mechanism, to ensure carbon
emissions control effectiveness and long-term. Emissions trading management institutions of carbon
trading regularly analyze and summarize carbon trading operation, and constantly improve the system
design, to make the system more practical. U.S. and European countries all take supervision priority to
emissions monitoring capabilities, statistics and information disclosure system. The international
experience shows that whether a carbon tax, project carbon trading market, quotas or other financing
methods of carbon emissions of greenhouse gases is inseparable from the monitoring capability,
statistics and information disclosure system. Whether commit emission reduction or not, the main
countries or regions, attach great importance to the systems. To verify the greenhouse gas reduction
quantities is crucial to supervision mechanism, policy formulation and performance evaluation. Since
1999, according to different areas of the country and the list of greenhouse gas emissions, EU has
evaluated and implemented community and other greenhouse gas monitoring mechanism plans. Besides
all carbon emissions trading participants should be supervised and enterprises reported annual emissions
in accordance with the relevant regulations, British also had set up independent third-party
authentication institutions. How to measure the performance of carbon market, how to ensure total
carbon emissions are not break the limitation, how to regulate carbon markets such as the monopoly, all
need to continue the public information disclosure system to respond. Because the market of fairness
and efficiency in largely based on the information openness and obtain sufficient convenient degree,
asymmetric information may increase the market transaction cost, influencing market participants to
assess market risks and benefits.
4.3 Financial innovation: the core tools of carbon trading pricing mechanism
USA and European countries have formed carbon emissions trading center, even appear emissions
securitization of financial derivatives. Trading center appears to promote the development of carbon
emissions trading, provides a more transparent information disclosure system, and makes developed
countries acquire carbon pricing power. Carbon trading price forming mechanism timely and accurately
reflects the carbon emissions rights supply and demand in the international market and domestic market
through financial market innovation. Commodities pricing are the futures price, international trade
practice is that commodity cif price equal to futures price add stock rise discount. The international
market pricing center is basically the several major futures market. The futures market is an open,
centralized and unified and approximate to completely competitive market, the futures market plays the
price discovery and hedging of system function, reflect true market supply and demand, and is really the
market price. The development and improvement of state financial market will influence the degree of
commodity pricing and its currency as trade possibilities of currency valuation. Through the financial
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innovation, actively involving in carbon market, expanding the influence of carbon emissions, and by
futures and options market, investors and risk investment and commercial Banks, financial innovation
environment, implementing the lever and interests transmission mechanism to extensive influence other
subjects’ environment responsibility. Global GHG trade, gradually formed a special carbon financial
market (including direct investment and financing, carbon trading, bank loans).
4.4 Look forward to the future: establishing global carbon trading market
Successful practice of Chicago climate exchange provided a solid foundation for the U.S. government to
formulate low carbon economic policy. From American Clean Energy and Safety Act, America will
depend on domestic carbon trading market pricing mechanism to gradually realize the new global
strategy. In order to promote the US-China cooperation on climate change. On February 9, 2009, the two
folk organization Asian Association U.S.-china relations center and the pew global climate change
center in Beijing published Joint with the Challenge, in collaboration with Climate Change - China-US
Energy Cooperation Map. Investment funds of two governments in the economic recovery of
investment funds, if appropriate, will help give rise to a new economic growth of the green science and
technology and green industry.
As the world's largest carbon emissions reduction credit demander and greenhouse gas emission
reduction pioneer, the EU called on all countries to join the establishment of a global uniform carbon
markets in Copenhagen Climate Change Agreement in 2012. Domestic carbon markets can and should
unite to build an efficient global market, in order to reduce the cost of actions. Copenhagen Agreement
can set up global and national targets to support carbon markets, and can be flexibly adjusted to the new
conditions.
A global carbon trading market construction has become the commonsense in American and European
countries. Because the interests of carbon financial capital globalization transmission mechanism and
characteristics of infiltration, developed countries and developing countries can jointly unify regional
carbon trading market to a whole organ, construct mutually beneficial and win-win new international
economic order. From the Bali Initiatives, international climate negotiations rectified defects in the
Kyoto Protocol and tried to expand its framework. These actions will focus on three aspects: first is that
developed countries promised deeply to reduce carbon emissions after 2012, developing countries
should voluntarily reduce emissions by 2020; second is to reform CDM and to promote more fair and
effective low-carbon investments; last refers to transfer advanced technology and capital mechanism.
Sufficient funds are crucial to implement Copenhagen Agreement. Regardless of the United Nations
framework convention on Climate Change and bilateral and multilateral funds, development fund, or all
kinds of private and public funds, should be well used, promote emissions reduction. Establish climate
international investment bank, and accumulate experiences of climate investments and finances for
developing countries to perform low carbon economy transformation.
5 Conclusion
This article has examined a broad band of issues which must be reflected upon carefully before
addressing a national plan to develop and implement carbon trading price regime to reduce carbon
emissions. The key conclusion of this review is to confirm the properties attributes of carbon emissions
and reasonable configuration of rights and liabilities and construct domestic regional carbon trading
market system. This is the basis of carbon trading and it also highlights the importance of supervisions
and regulations of carbon market. Otherwise, finances can play an important role in promoting carbon
reductions by carbon financial market operation. So this existing framework can serve as a foundation
upon which policy makers can build in order to implement a carbon reduction program without
prejudice to jeopardizing the existing economic development.
About author:
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Dong Yan, School of Humanities and Societies, University of Petroleum (East China), lecturer, doctoral
student of China University of Political Science and Law majored at the environment and resources
protection law science. Research mainly on climate law, energy law, environmental law.
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