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CCX merely involves a few US firms; participants of “political” trading scheme aim to influence development of a federal US emissions trading scheme

Posted by gmarkets on 27 September, 2007

Large corporations engage in alternative trading schemes to indirectly prepare for larger schemes expected to emerge in coming years, according to Pinkse, J. and Kolk, A., in ‘Multinational Corporations and Emissions Trading’ in European Management Journal (2007).

Only few, assured participants in CCX: Participation in the CCX illustrated this. It reflected several features of the UK-ETS; only seven firms were actually engaged and most mention that they expect to reach their tar­get, set as part of the CCX. It is a purely private insti­tution, which leads to a positive selection effect; it only attracts those firms that can achieve their volun­tary binding targets rather easily.

Originators foresee future constraints: What is different though is that the CCX merely involves US firms. Participants clearly use institutional agency as three of the seven firms are also founding members and aim to influence the development of a federal US emissions trading scheme. It is thus a form of institu­tional entrepreneurship as they motivate their partic­ipation as a way to prepare for a public trading scheme, because they anticipate a high constraint in the future.

Firms wary of “political” CCX: The political undertone of the CCX also deters firms. Electricity company FPL, for example, believes that it is ‘not yet representative of what a real regulatory driven greenhouse gas market pro­gram will be like’, and Occidental Petroleum argues that schemes other than the EU-ETS ‘offer little busi­ness reason for most companies to participate’.

Reference: Pinkse, J. and Kolk, A., Multinational Corporations and Emissions Trading; European Management Journal (2007) doi:10.1016/j.emj.2007.07.03

Erisk Net, 27/9/2007

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