The Effectiveness of the Clean Development Mechanism – A law and economics analysis

Climate change has been acknowledged as a threat to humanity. Most scholars agree that to avert dangerous climate change and to transform economies into low-carbon societies, deep global emission reductions are required by the year 2050. Under the framework of the Kyoto Protocol, the Clean Development Mechanism (CDM) is the only market-based instrument that encourages industrialised countries to pursue emission reductions in developing countries. The CDM aims to pay the incremental finance necessary to operationalize emission reduction projects which are otherwise not financially viable. According to the objectives of the Kyoto Protocol, the CDM should finance projects that are additional to those which would have happened anyway, contribute to sustainable development in the countries hosting the projects, and be cost-effective. To enable the identification of such projects, an institutional framework has been established by the Kyoto Protocol which lays out responsibilities for public and private actors. This thesis examines whether the CDM has achieved these objectives in practice and can thus be considered an effective tool to reduce emissions. To complete this investigation, the book applies economic theory and analyses the CDM from two perspectives. The first perspective is the supply-dimension which answers the question of how, in practice, the CDM system identified additional, cost-effective, sustainable projects and, generated emission reductions. The main contribution of this book is the second perspective, the compliance-dimension, which answers the question of whether industrialised countries effectively used the CDM for compliance with their Kyoto targets. The application of the CDM in the European Union Emissions Trading Scheme (EU ETS) is used as a case-study. Where the analysis identifies inefficiencies within the supply or the compliance dimension, potential improvements of the legal framework are proposed and discussed.

Sanctions and public enforcement of insider trading laws in Europe

The recent financial crisis triggered an increasing demand for financial regulation to counteract the potential negative economic effects of the evermore complex operations and instruments available on financial markets. As a result, insider trading regulation counts amongst the relatively recent but particularly active regulation battles in Europe and overseas. Claims for more transparency and equitable securities markets proliferate, ranging from concerns about investor protection to global market stability. The internationalization of the world’s securities market has challenged traditional notions of regulation and enforcement. Considering that insider trading is currently forbidden all over Europe, this study follows a law and economics approach in identifying how this prohibition should be enforced. More precisely, the study investigates first whether criminal law is necessary under all circumstances to enforce insider trading; second, if it should be introduced at EU level. This study provides evidence of law and economics theoretical logic underlying the legal mechanisms that guide sanctioning and public enforcement of the insider trading prohibition by identifying optimal forms, natures and types of sanctions that effectively induce insider trading deterrence. The analysis further aims to reveal the economic rationality that drives the potential need for harmonization of criminal enforcement of insider trading laws within the European environment by proceeding to a comparative analysis of the current legislations of height selected Member States. This work also assesses the European Union’s most recent initiative through a critical analysis of the proposal for a Directive on criminal sanctions for Market Abuse. Based on the conclusions drawn from its close analysis, the study takes on the challenge of analyzing whether or not the actual European public enforcement of the laws prohibiting insider trading is coherent with the theoretical law and economics recommendations, and how these enforcement practices could be improved.