Emissions trading and the GATS financial services provisions : a case study of the Australian carbon pricing mechanism

Purpose The purpose of this paper is to determine whether greenhouse gas (GHG) tradeable instruments will be classified as financial products within the scope of the World Trade Organization (WTO) law and to explore the implications of this finding. Design/methodology/approach This purpose is achieved through examination of the units of the Australian Carbon Pricing Mechanism (CPM), namely eligible emissions units. These units are analysed through the lens of the definition of financial products provided in the General Agreement for Trade in Services (the GATS). Findings This paper finds that eligible emissions units will be classified as financial instruments, and therefore the provisions that govern their trade will be regulated by the GATS. Considering this, this paper explores the limitations that are introduced by the Australian legislation on the trade of eligible emissions units. Research limitations/implications This paper is limited in its analysis to the Australian CPM. In order to draw conclusions on the issues raised by this analysis it is necessary to consider the WTO requirements against an operating emissions trading scheme. The Australian CPM presents a contemporary model of an appropriate scheme. Originality/value The findings in this paper are crucial in a GHG constrained society. This is because emissions trading schemes are becoming popular measures for pricing GHG emissions, and for this reason the units that are traded and surrendered for emissions liabilities must be classified appropriately on a global scale. Failing to do this could result in differential treatment that may be contrary to the intentions of important global agreements, such as the WTO covered agreements.

The Impacts of Climate Change on Australia’s Food Production and Export

The global food system is undergoing unprecedented change. With population increases, demands for food globally will continue to rise at the same time that agricultural environments are compromised through urban encroachment, climate change and environmental degradation. Australia has long identified itself as an agricultural exporting nation—but what will its capacity be in feeding an increasing global population as it also comes to terms with extreme climatic events such as the floods, fires and droughts, and reduced water availability, experienced in recent decades? This chapter traces the history of Australian agricultural exports and evaluates its food production and export capacity against scientific predictions of climate change impacts. With the federal government forecasting declines in the production of wheat, beef, dairy and sugar, Australia’s key export commodities may well be compromised. Calls to produce more food using new technologies are likely to generate significant environmental problems. Yet, a radical reconfiguration of Australian agriculture which incorporates alternative approaches, such as agro-ecology, is rarely considered by government and industry.

Export readiness index : construction and analysis

The internationalisation process of firms has attracted much research interest since the 1970s. It is noted, however, that a significant research gap exists in studies with a primary focus on the pre-internationalisation behaviour of firms. This paper proposes the incorporation of a pre-internationalisation phase into the traditional Uppsala model of firm internationalisation to address the issue of export readiness. Through extensive literature review, the concepts fundamental to the ability of an Uppsala type firm to begin internationalisation through an export entry mode are identified: exposure to stimuli factors, attitudinal commitment of decision makers towards exporting, the firm’s resource capabilities, as well as the moderating effect of lateral rigidity. The concept of export readiness is operationalised in this study through the construction of an export readiness index (ERI) using exploratory and confirmatory factor analysis. The index is then applied to some representative cases and tested using logistic regression to establish its validity as a diagnostic tool. The proposed ERI presents not only a more practical approach towards analysing firms’ export readiness but has also major public policy implications as a possible tool for government export promotion agencies.

Loss reduction experiences in electric power distribution companies of Iran

The experiences of the loss reduction projects in electric power distribution companies (EPDCs) of Iran are presented. The loss reduction methods, which are proposed individually by 14 EPDCs, corresponding energy saving (ES), Investment costs (IC), and loss rate reductions are provided. In order to illustrate the effectiveness and performance of the loss reduction methods, three parameters are proposed as energy saving per investment costs (ESIC), energy saving per quantity (ESPQ), and investment costs per quantity (ICPQ). The overall ESIC of 14 EPDC as well as individual average and standard deviation of the EISC for each method is presented and compared. In addition, the average and standard deviation of the ESPQs and ICPQs for the loss reduction methods, individually, are provided and investigated. These parameters are useful for EPDCs that intend to reduce the electric losses in distribution networks as a benchmark and as a background in the planning purposes.

A securities market operator's use of the "please explain" price query and its impact on compliance

Market operators in New Zealand and Australia, such as the New Zealand Exchange (NZX) and the Australian Securities Exchange (ASX), have the regulatory power in their listing rules to issue queries to their market participants to explain unusual fluctuations in trading price and/or volume in the market. The operator will issue a price query where it believes that the market has not been fully informed as to price relevant information. Responsive regulation theory has informed much of the regulatory debate in securities laws in the region. Price queries map onto the lower level of the enforcement pyramid envisaged by responsive regulation and are one strategy that a market operator can use in communicating its compliance expectations to its stakeholders. The issue of a price query may be a precursor to more severe enforcement activities. The aim of this study is to investigate whether increased use of price queries by the securities market operator in New Zealand corresponded with an increase in disclosure frequency by all participating companies. The study finds that an increased use of price queries did correspond with an increase in disclosure frequency. A possible explanation for this finding is that price queries are an effective means of appealing to the factors that motivate corporations, and the individuals who control them, to comply with the law and regulatory requirements. This finding will have implications for both the NZX and the ASX as well as for regulators and policy makers generally.

Examining corporate governance disclosures of listed companies in Fiji

In 2009, the Capital Markets Development Authority (CMDA) - Fiji’s capital market regulator - introduced the Code of Corporate Governance (the Code). The Code is ‘principle-based’ and requires companies listed on the South Pacific Stock Exchange (SPSE) and the financial intermediaries to disclose their compliance with the Code’s principles. While compliance with the Code is mandatory, the nature and extent of disclosure is at the discretion of the complying entities. Agency theory and signalling theory suggest that firms with higher expected levels of agency costs will provide greater levels of voluntary disclosures as signals of strong corporate governance. Thus, the study seeks to test these theories by examining the heterogeneity of corporate governance disclosures by firms listed on SPSE, and determining the characteristics of firms that provide similar levels of disclosures. We conducted a content analysis of corporate governance disclosures on the annual reports of firms from 2008-2012. The study finds that large, non-family owned firms with high levels of shareholder dispersion provide greater quantity and higher quality corporate governance disclosures. For firms that are relatively smaller, family owned and have low levels of shareholder dispersion, the quantity and quality of corporate governance disclosures are much lower. Some of these firms provide boilerplate disclosures with minimal changes in the following years. These findings support the propositions of agency and signalling theory, which suggest that firms with higher separation between agents and principals will provide more voluntary disclosures to reduce expected agency costs transfers. Semi-structured interviews conducted with key stakeholders further reinforce the findings. The interviews also reveal that complying entities positively perceive the introduction of the Code. Furthermore, while compliance with Code brought about additional costs, they believed that most of these costs were minimal and one-off, and the benefits of greater corporate disclosure to improve user decision making outweighed the costs. The study contributes to the literature as it provides insight into the experience of a small capital market with introducing a ‘principle-based’ Code that attempts to encourage corporate governance practices through enhanced disclosure. The study also assists policy makers better understand complying entities’ motivations for compliance and the extent of compliance.

The True Cost of Greenhouse Gas Emissions: Analysis of 1,000 Global Companies

This study elucidated the shadow price of greenhouse gas (GHG) emissions for 1,024 international companies worldwide that were surveyed from 15 industries in 37 major countries. Our results indicate that the shadow price of GHG at the firm level is much higher than indicated in previous studies. The higher shadow price was found in this study as a result of the use of Scope 3 GHG emissions data. The results of this research indicate that a firm would carry a high cost of GHG emissions if Scope 3 GHG emissions were the focus of the discussion of corporate social responsibility. In addition, such shadow prices were determined to differ substantially among countries, among sectors, and within sectors. Although a number of studies have calculated the shadow price of GHG emissions, these studies have employed country-level or industry-level data or a small sample of firm-level data in one country. This new data from a worldwide firm analysis of the shadow price of GHG emissions can play an important role in developing climate policy and promoting sustainable development.

Examining the cost efficiency of Chinese hydroelectric companies using a finite mixture model

This paper evaluates the operational activities of Chinese hydroelectric power companies over the period 2000-2010 using a finite mixture model that controls for unobserved heterogeneity. In so doing, a stochastic frontier latent class model, which allows for the existence of different technologies, is adopted to estimate cost frontiers. This procedure not only enables us to identify different groups among the hydro-power companies analysed, but also permits the analysis of their cost efficiency. The main result is that three groups are identified in the sample, each equipped with different technologies, suggesting that distinct business strategies need to be adapted to the characteristics of China's hydro-power companies. Some managerial implications are developed. © 2012 Elsevier B.V.

Contributions of the private sector to global biodiversity protection: case study of the Fortune 500 companies

Since the inception of the UN Convention on Biological Diversity (CBD) in 1992, little progress has been achieved in terms of involving the business community in protecting biological diversity worldwide. This article assesses the current activities of US Fortune 500 companies with respect to global biodiversity protection and the goals of the CBD. Data and information collected from 500 companies within eight major industrial sectors were further categorized at the company level to assess each company's involvement in global biodiversity protection. Our findings show that although companies' business profiles highly influence their decision-making process regarding the adoption of biodiversity protection policies and measures, their revenue profiles are less influential. We show that despite generating low revenues, companies in the utility sector are more active in the adoption of biodiversity protection policy than those in the financial sector, which generate high revenues. This study also demonstrates that companies must be convinced of the major effects of biodiversity loss on their bottom lines to be motivated to protect biological diversity. Companies' business and business-related risk profiles can also influence the adoption of biodiversity protection policies within the company. The study further demonstrates that a measurable biodiversity impact indicator is necessary for the companies to get seriously involved in the mitigation action. Finally, this study proposes a three-step biodiversity loss mitigation action framework that is drawn upon the assessment of the 500 companies that can contribute to develop an elaborative framework of business sector-specific mitigation plan. © 2013 Copyright Taylor and Francis Group, LLC.

Cost efficiency of Japanese steam power generation companies : a Bayesian comparison of random and fixed frontier models

This study analyses and compares the cost efficiency of Japanese steam power generation companies using the fixed and random Bayesian frontier models. We show that it is essential to account for heterogeneity in modelling the performance of energy companies. Results from the model estimation also indicate that restricting CO2 emissions can lead to a decrease in total cost. The study finally discusses the efficiency variations between the energy companies under analysis, and elaborates on the managerial and policy implications of the results.

Sulfur dioxide allowances : trading and technological progress

The US Clean Air Act Amendments introduce an emissions trading system to regulate SO2 emissions. This study finds that changes in SO2 emissions prices are related to innovations induced by these amendments. We find that electricity-generating plants are able to increase electricity output and reduce emissions of SO2 and NOx from 1995 to 2007 due to the introduction of the allowance trading system. However, compared to the approximate 8% per year of exogenous technological progress, the induced effect is relatively small, and the contribution of the induced effect to overall technological progress is about 1-2%.

Regulation, pollution and heterogeneity in Japanese steam power generation companies

In this paper, the random stochastic frontier model is used to estimate the technical efficiency of Japanese steam power generation companies taking into regulation and pollution. The companies are ranked according to their productivity for the period 1976-2003 and homogenous and heterogeneous variables in the cost function are disentangled. Policy implication is derived.

Productivity change of Nigerian insurance companies : 1994-2005

The aim of this paper is to estimate the productivity change of Nigerian insurance companies and to rank the companies analysed in the sample according to their productivity score. This benchmark exercise provides the companies analysed with a view of how their relative productivity can be upgraded. For this purpose, the non-parametric Luenberger productivity model is used. For comparative purposes, the non-parametric Luenberger-Hicks-Moorsteen productivity indicator is also used. The companies are ranked according to their total productivity for the period 1994-2005, using both models, which produce variations in the respective results. Economic implications arising from the study are derived.