Problems in China's Carbon Finance Market and Countermeasures

By Fang, Hu; XiaoLin, Zhou et al. | Canadian Social Science, September 1, 2013 | Go to article overview

Problems in China's Carbon Finance Market and Countermeasures


Fang, Hu, XiaoLin, Zhou, Aiwei, Zhang, Canadian Social Science


Abstract

The Carbon finance is an important mechanism innovation of financial system in response to climate change which supports the low carbon economy development. Most of the countries in the world carry out carbon trading actively. With the reform of china's financial system, the financial structure of our country is in the constant change. Carbon finance has gradually become a new force in the financial system in China. But many problems still exist influenced by the financial environment, financial policy and other factors. In this paper, firstly, we show the conception of Carbon finance, and then we analyze the problems existing in the Carbon finance market and state the factors. Finally, we put forward some of the suggestions and countermeasures which are suitable to the development of Carbon finance market in China which are Based on the analysis of the problems.

Key words: Carbon finance; China; Financial policy

1. INTRODUCTION OF CARBON FINANCE MARKET

1.1 Conception of Carbon Finance Market

Carbon finance market, known as the carbon trading market, it is the result of "Kyoto Protocol", in which the amount of carbon emissions and reductions has become a scarce valuable products. It would also include the elimination of any barriers to trade in financial services that would inhibit the development of a worldwide market for carbon. Each country has a carbon emission according to its national conditions (quota), but the actual emissions may have higher or lower than the quota. This difference makes the carbon trading market supply and demand, the countries whose carbon emissions is less than the quota can sold excess amount to the countries whose carbon emissions is greater than the quota countries.

1.2 Participant in Carbon Finance Market

The main market in carbon emissions, including: provider of intermediaries, the final user, regulatory agencies and other market participants. The providers include project developers, abatement costs low emission entity, international financial organizations, carbon funds, banks and other financial institutions, consulting, technology development and transfer business etc.; the final users include the emission limited countries confined by "Kyoto Protocol", the emissions limited the enterprise confined by EU ETS, limited enterprise confined by the Regional Greenhouse Gas and personal; Other participants include the fund companies, securities companies, insurance companies, credit Rating firm and individual speculators.

1.3 Classification of Carbon Finance Market

From a legal point of view, the carbon finance market can be divided into two types:

a. Forced trading carbon finance market. The government as the organizer and manager of carbon dioxide emission reduction assigned to regular emission limit to each participant. The participants can only develop production activities within the limit and the excess emissions may be punished. In order to avoid economic penalties excess emissions, caused by the emission quota, enterprises need to buy emission rights from those firms with excess quota. This kind of carbon finance market, which is to achieve the mandatory emission reduction requirements and produce, is called forced trading carbon finance market.

b. Voluntary trading carbon finance market. Based on considerations of social responsibility, brand building, the future environmental policy changes, some enterprises initial mutual agreement on greenhouse gas emissions by internal protocol, adjust supply and demand through the quota trading regulate in order to achieve agreement. That's the voluntary carbon trading market based on its transaction mechanism.

2. ANALYSIS OF THE PROBLEMS IN CHINA'S CARBON FINANCE MARKET

With the rapid development of economy, the Carbon Finance Market of China has made a big progress, not only in the scale and level of the industry but also in the competitiveness. But compared with other developed countries, many problems still exist influenced by the financial environment, financial policy and other factors. …

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