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Kyoto mechanisms attractive for global firms because they enable them to exploit cross-boarder activities

Posted by gmarkets on 27 September, 2007

Another way of using agency in dealing with the EU-­ETS was by creating and trading emission credits from the Clean Development Mechanism or Joint Imple­mentation, according to Pinkse, J. and Kolk, A., in ‘Multinational Corporations and Emissions Trading’ in European Management Journal (2007).

Non-installation firms can participate in EU-ETS with link-up: Since October 2004, CDM and JI credits can be used to fulfil the obligations under the EU-­ETS through the ‘linking directive’ (EC, 2004). By embarking upon particular projects that fit into regu­lar business activities and at the same time lead to emission credits, they are able to influence what con­stitute legitimate CDM/JI projects. In this way, it is possible for firms without installations to also partic­ipate in the EU-ETS.

Big Corps like Kyoto mechanisms: The Kyoto mechanisms are par­ticularly attractive for big corporations because they enable them to further exploit their cross-border activities. As Deutsche Bank exemplifies, to support clients many banks are trying to generate CDM credits by financing projects in developing countries that might generate credits or invest in climate funds that pool CDM projects: “Deutsche Bank has been a pioneer in the field of CDM/JI projects – Deutsche Bank was one of only two banks to invest in the World Bank’s groundbreaking Prototype Car­bon Fund (PCF) and one of the only banks to participate in the Umbrella Carbon Fund (UCF). We are also involved in several private sector projects in a variety of countries and methodologies.”

Firms pile up credits in CDM swag: Activities with regard to the Kyoto mechanisms are not necessarily unrelated to compliance though. Var­ious global firms currently still facing low constraints on their GHG emissions are building a portfolio of cred­its for compliance in future periods of the EU-ETS, because unlike EU-ETS allowances, CDM credits do not expire after the first trading period.

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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