Environmental Engineering Reference
In-Depth Information
the lower house but debate in the upper
house is beginning in summer 2010.
management, used across markets as a financial
instrument, in projects as an underlying asset,
a means for counterparty familiarisation, and a
mechanism for portfolio diversification in com-
pany acquisition or development. The shape of
today's carbon markets were explained and the
risk breakdown of a CDM project, to show how
carbon project risk analysis can be applied across
other applications. Then, the case study of HSBC
and its sustainability practice was discussed as a
successful environmentally aware business model
with voluntary exposure to carbon as an opportu-
nity and risk management tool. Finally, uncertainty
over pending carbon abatement legislation was
explained as an area in need of research and clari-
fication for the global carbon market to prosper.
Carbon is an emerging asset class unlikely to
disappear even in the absence of firm government
commitments. The total value of the market grew
by 6% to $144 billion in 2009 from 2008 despite
the financial crisis and many companies putting
early action on hold. 8.7 billion tonnes of carbon
were traded globally in 2009, another significant
increase from the 4.8 billion in 2008 (Kossoy
and Ambrosi, 2010). Pending carbon legislation
is both a risk and an opportunity, manageable by
using the wealth of carbon strategies available
to risk managers today. With its own unique risk
and investment profile, carbon can be a trading
instrument and hedge, a source of project finance
and equity investment, and a means of portfolio or
business diversification. Companies cash strapped
in 2008 monetised carbon allowance given to them
for free at the start of the year to raise money when
credit was (and still is) in short supply (Kossoy
and Ambrosi, 2010). Other companies took ad-
vantage of competitors severely affected by the
downturn and the market saw a rise in merger and
acquisition activity where either entire portfolios
of projects or credits were purchased, or in the
case of exchanges and emissions service providers,
the enterprises were bought and sold.
Diversification in the project market meant
that less developing countries received financ-
Without clarity in these major emitter markets,
action on climate change will certainly not happen
through a top-down approach. Organisations such
as the United Nations Environment Programme
leading a Finance Initiative to integrate green
finance in the private and public sector, policy
approaches such as the Green New Deal launched
as a global agreement toward low carbon growth,
2009's green fiscal stimulus packages, and interna-
tional landmarks like the COP 15 in Copenhagen
certainly influence broader business agendas. They
have been leaders of discourse and hegemony
formation, but they cannot completely dispel
the opacity of government policymaking. These
bridges between civil society and the state embed
the discourse needed for companies to take bottom-
up action. By underpinning carbon's legitimacy
and relevancy to quantifiable emissions reduction
targets, first movers in the emissions space work
with civil society and influence policymaking, pav-
ing the way forward for environmentally aware,
environmentally progressive businesses models.
CONCLUSION
This chapter began by providing the background
of environmental markets, explaining how Coase's
theory of externalities was put into practice and
solved using market mechanisms in the US SOx
and NOx markets. The success of these markets
and the rise of neoliberalism, accompanied by
the shift to liberal environmentalism lent itself to
the approach to climate change mitigation seen
today—economically efficient solutions are em-
braced in the guise of environmental protection,
providing a win-win for both the private sector
exposed to carbon risk and the civil society most
exposed to the dangers inherent in climate change.
The chapter then described the instrumentalisation
