Market and Greenhouse Gas Emission: the Process of Regulation Concerning the Carbon Markets Today

Abstract

This article mainly aims to analyse the crescent need to regulate carbon markets, a relatively new kind of market, which has been structured without due attention. To the biggest specialized individuals on this subject, carbon markets are about to become the biggest derivative market in the world, and there are already several national and foreign companies specialised only in buying and selling carbon quotas for Greenhouse Gas (GHG) emissions between countries and companies which pollute the atmosphere. The problem was analysed by the international non-governmental organisation called Friends of the Earth and shown in the form of a report called Subprime Carbon? Rethinking the World’s Largest New Derivatives Market, which has pointed out that the commercialization of those permissions to GHG emission is a financial market product such as any other. It does not neglect environmental objectives in the carbon quotas creation process, beyond what is allowed to each country. Anyhow, it needs supervision and regulation in order to correctly comply the financial products’ attributes, such as credibility, fair price, and liquidity. Without implementation of this regulation, the commercialization of such quotas is merely based on prices reached through financial speculation, and that may or may not be achieved.