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 November 28, 2014 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 November 28, 2014).

Share This


More From ScienceDaily



More Earth & Climate News

Friday, November 28, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Raw: Japan's Mt. Aso Volcano Spews Rocks

Raw: Japan's Mt. Aso Volcano Spews Rocks

AP (Nov. 28, 2014) — A volcano in southern Japan is spewing volcanic magma rocks. A regional weather observatory says this could be Mt. Aso's first magma eruption in 22 years. (Nov. 28) Video provided by AP
Powered by NewsLook.com
Scientists Find Invisible Space Shield Protecting Earth

Scientists Find Invisible Space Shield Protecting Earth

Newsy (Nov. 27, 2014) — An invisible barrier is keeping dangerous super fast electrons from interfering with our atmosphere, but scientists aren't entirely sure how. Video provided by Newsy
Powered by NewsLook.com
Bolivian Recycling Initiative Turns Plastic Waste Into School Furniture

Bolivian Recycling Initiative Turns Plastic Waste Into School Furniture

Reuters - Innovations Video Online (Nov. 26, 2014) — Innovative recycling project in La Paz separates city waste and converts plastic garbage into school furniture made from 'plastiwood'. Tara Cleary reports. Video provided by Reuters
Powered by NewsLook.com
Blu-Ray Discs Getting Second Run As Solar Panels

Blu-Ray Discs Getting Second Run As Solar Panels

Newsy (Nov. 26, 2014) — Researchers at Northwestern University are repurposing Blu-ray movies for better solar panel technology thanks to the discs' internal structures. 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