Featured Research

from universities, journals, and other organizations

Free market is best way to combat climate change, study suggests

Date:
July 15, 2013
Source:
University of Edinburgh
Summary:
The best way to reduce carbon emissions and combat climate change is through the use of market forces, according to a new study.

The best way to reduce carbon emissions and combat climate change is through the use of market forces, according to a new study.

Related Articles


Researchers who monitored the effectiveness of the European Climate Exchange (ECX) -- the world's biggest carbon trading platform -- found it to be as efficient as Europe's two biggest exchanges, the London Stock Exchange and the Euronext Paris.

Using free market platforms like the ECX to combat climate change could provide the basis for the introduction of a mandatory emissions cap and trade scheme worldwide.

The report found that the value of the trades on the ECX were higher after the market closed, a sign of growing sophistication within platforms. It means that trades were made with greater confidence based upon increasingly detailed information.

Researchers said there are also signs of maturity based on increased liquidity -- the immediate availability of a party to trade with -- and price efficiency, which means all available information is incorporated into prices so they are traded in a relatively transparent manner.

The ECX was created by the EU Emissions Trading Scheme (EU-ETS) in 2005 to help the European Union (EU) achieve its obligations under the Kyoto Protocol to reduce carbon emissions.

The EU set limits and issued permits for how much carbon firms could emit into the atmosphere. If companies exceed their limit, they incur regulatory penalties.

To avoid this, the EU-ETS allows firms with high emissions to buy the permits of other companies on platforms such as the ECX. By creating a market, it gave firms a financial incentive to reduce their carbon emissions.

Researchers said that changes are needed to ensure the EU-ETS survives Europe's economic downturn. Since the study appears to confirm the ECX's effectiveness, researchers say the EU-ETS should be allowed to self-adjust emission caps in reaction to changes in the Eurozone's fortunes and industrial production.

Gbenga Ibikunle, from the University of Edinburgh Business School, said: "While individual responsibility for combating climate change is important, much needs to be done to incentivise companies -- especially those who emit most of the world's carbon -- to cut back too. This study shows that free market mechanisms such as the EU-ETS can be effective in doing that. Several other schemes around the world are already learning from this and adopting it as a model."

The paper is published in the International Journal of the Economics of Business.


Story Source:

The above story is based on materials provided by University of Edinburgh. Note: Materials may be edited for content and length.


Journal Reference:

  1. Gbenga Ibikunle, Andros Gregoriou, Naresh R. Pandit. Price Discovery and Trading after Hours: New Evidence from the World’s Largest Carbon Exchange. International Journal of the Economics of Business, 2013; 1 DOI: 10.1080/13571516.2013.782986

Cite This Page:

University of Edinburgh. "Free market is best way to combat climate change, study suggests." ScienceDaily. ScienceDaily, 15 July 2013. <www.sciencedaily.com/releases/2013/07/130715105429.htm>.
University of Edinburgh. (2013, July 15). Free market is best way to combat climate change, study suggests. ScienceDaily. Retrieved January 30, 2015 from www.sciencedaily.com/releases/2013/07/130715105429.htm
University of Edinburgh. "Free market is best way to combat climate change, study suggests." ScienceDaily. www.sciencedaily.com/releases/2013/07/130715105429.htm (accessed January 30, 2015).

Share This


More From ScienceDaily



More Earth & Climate News

Friday, January 30, 2015

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Raw: Rare Clouds Fill Grand Canyon

Raw: Rare Clouds Fill Grand Canyon

AP (Jan. 29, 2015) For the second time in two months, a rare weather phenomenon filled the Grand Canyon with thick clouds just below the rim on Wednesday. (Jan. 29) Video provided by AP
Powered by NewsLook.com
Senate Passes Bill for Keystone XL Pipeline

Senate Passes Bill for Keystone XL Pipeline

AP (Jan. 29, 2015) The Republican-controlled Senate has passed a bipartisan bill approving construction of the Keystone XL oil pipeline. (Jan. 29) Video provided by AP
Powered by NewsLook.com
"Cloud Inversion" In Grand Canyon

"Cloud Inversion" In Grand Canyon

Reuters - US Online Video (Jan. 29, 2015) Time lapse video captures a blanket of clouds amassing in the Grand Canyon -- the result of a rare meteorological process called "cloud inversion." Rough Cut (no reporter narration). Video provided by Reuters
Powered by NewsLook.com
Why Researchers Say We Should Cut Back On Biofuels

Why Researchers Say We Should Cut Back On Biofuels

Newsy (Jan. 29, 2015) Biofuels aren&apos;t the best alternative to fossil fuels, according to a new report. In fact, they&apos;re quite a bad one. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Plants & Animals

Earth & Climate

Fossils & Ruins

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins