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Even during these tough economic times the current administration has proposed to revive the US “Cap and Trade” initiative and to see it through to passage. Many in the public are not aware that the idea of cap and trade is not new as similar programs have been successfully used in the US and other countries to “wind down” environmentally damaging emissions. The aim of this paper is to explain cap and trade and to project what form current proposals could take.

This paper explains cap and trade and goes on to project what form current proposals could take. It also examines the alternatives and the arguments both for and against cap and trade. Projected costs and benefits are examined, along with some examination of the actual mechanics by which the system is expected to operate.

The current US mood is that proposals to reduce greenhouse gas emissions will be expensive and burdensome to businesses and consumers. In fact, this is what is preventing them from going forward. The consensus is now growing that in order to achieve the goals of cap and trade, proposals will have to be cost effective, expanded internationally, and include India, China and other emerging manufacturing economies. If this can be done, it appears that cap and trade will continue to be part of the landscape of US emission reductions, along with the use of alternative and other renewable energy resources.

The paper examines costs and benefits of cap and trade, along with some examination of the actual mechanics by which the system is expected to operate

In the era of climate change, industrial organizations are under increasing pressure from consumers and regulators to reduce greenhouse gas emissions. The purpose of this paper is to examine the effectiveness of product mix as a strategy to deliver the low carbon supply chain under the cap-and-trade policy.

The authors incorporate the cap-and-trade policy into the green product mix decision models by using game-theoretic approach and compare these decisions in a decentralized model and a centralized model, respectively. The research explores potential behavioral changes under the cap-and-trade in the context of a two-echelon supply chain.

The analysis results show that the channel structure has significant impact on both economic and environmental performances. An integrated supply chain generates more profits. In contrast, a decentralized supply chain has lower carbon emissions. The cap-and-trade policy makes a different impact on the economic and environmental performances of the supply chain. Balancing the trade-offs is critical to ensure the long-term sustainability.

The research offers many interesting observations with respect to the effect of product mix strategy on operational decisions and the trade-offs between costs and carbon emissions under the cap-and-trade policy. The insights derived from the analysis not only help firms to make important operational and strategic decisions to reduce carbon emissions while maintaining their economic competitiveness, but also make meaningful contribution to governments’ policy making for carbon emissions control.

Globalisation is generally defined as the “denationalisation of clusters of political, economic, and social activities” that destabilize the ability of the sovereign State to control activities on its territory, due to the rising need to find solutions for universal problems, like the pollution of the environment, on an international level. Globalisation is a complex, forceful legal and social process that take place within an integrated whole with out regard to geographical boundaries. Globalisation thus differs from international activities, which arise between and among States, and it differs from multinational activities that occur in more than one nation‐State. This does not mean that countries are not involved in the sociolegal dynamics that those transboundary process trigger. In a sense, the movements triggered by global processes promote greater economic interdependence among countries. Globalisation can be traced back to the depression preceding World War II and globalisation at that time included spreading of the capitalist economic system as a means of getting access to extended markets. The first step was to create sufficient export surplus to maintain full employment in the capitalist world and secondly establishing a globalized economy where the planet would be united in peace and wealth. The idea of interdependence among quite separate and distinct countries is a very important part of talks on globalisation and a significant side of today’s global political economy.

The purpose of this study is to model a vehicle routing problem with integrated picking and delivery under carbon cap and trade policy. This study also provides sensitivity analyses of carbon cap and price to the total cost.

A mixed integer linear programming (MILP) model is formulated to model the vehicle routing with integrated order picking and delivery constraints. The model is then solved by using the CPLEX solver. Carbon footprint is estimated by a fuel consumption function that is dependent on two factors, distance and vehicle speed. The model is analyzed by considering 10 suppliers and 20 customers. The distance and vehicle speed data are generated using simulation with random numbers.

Significant amount of carbon footprint can be reduced through the adoption of eco-efficient vehicle routing with a marginal increase in total transportation cost. Sensitivity analysis indicates that compared to carbon cap, carbon price has more influence on the total cost.

The model considers mid-sized problem instances. To analyze large size problems, heuristics and meta-heuristics may be used.

This study provides an analysis of carbon cap and price model that would assist practitioners and policymakers in formulating their policy in the context of carbon emissions.

This study provides two significant contributions to low carbon supply chain management. First, it provides a vehicle routing model under carbon cap and trade policy. Second, it provides a sensitivity analysis of carbon cap and price in the model.

This study aims to examine the impact of the emission allowances granted under California's cap‐and‐trade program (AB 32) – the first major program of its kind in the USA – on the balance sheets and income statements of the S&P 500. So far there has been little discussion of what a cap‐and‐trade program would mean for the US companies' financial statements.

The author states and tests an economic model of the relation between greenhouse gas emissions and financial statement variables at the individual company level and use this model to predict emission allowances and obligations for the S&P 500.

The author's analysis suggests that the average S&P 500 company's balance sheet and net income will be adversely affected under several different accounting treatments for emission allowances, with the greatest impacts in the utilities, energy, and materials sectors.

US and European regulators have yet to set a single standard for emissions accounting. Without a single standard, companies acting in their own interests may use diverse or unclear accounting treatments for similar economic benefits. This can raise the cost of capital and hurt investors.

This is the first study of which the author is aware to document how the emission allowances under the AB 32 cap‐and‐trade program will affect American companies' balance sheets.

A new financial asset (Allotment Trading Unit or ATU) that allows a firm to pollute was issued to a number of Chicago firms in 2000 as part of a cap‐and‐trade model to reduce emissions in the Chicago area. A model of this market was developed to enable us to: 1.) Estimate equilibrium tradable credit prices and quantities and calculate compliance costs for comparison with traditional environmental regulation; 2.) Estimate the consequences for prices and quantities of introducing changing emitter costs; and 3.) Estimate the impacts on prices and quantities of changing market features such as auctioning tradable credits instead of a free allocation, introducing spatial constraints, and changing the emissions cap. The model's results on the price determination of this new financial asset are of interest to accountants and financial analysts. A dated bankable ATU credit has a one‐year life expectancy, but future tradable credits can be bought or sold for use at the appropriate future date. It is an intangible asset that should be disclosed, measured and valued. The valuation to place on this asset is an important research topic in finance and accounting and various valuation approaches are discussed to handle the short‐term and long‐term price paths.

This paper investigates to find whether it is possible to align the interests of a small and medium manufacturing enterprise (SMME) with its raw material supplier in a manufacturing supply chain (MSC) to achieve a sustainable solution. To this end, current study examines the coordination of an MSC under cap and trade consisting of a raw material supplier and a carbon-emitting SMME confronting a stochastic demand.

The model is developed under both the decentralized and centralized decision-making scenarios. Under the investigated model, the SMME decides on both production quantity and sustainability level simultaneously. To achieve coordination and align the interests of both MSC members toward sustainable economic development goals, a customized revenue-sharing contract is developed.

Although the centralized model is profitable for the MSC, it makes a loss for the SMME compared to the decentralized scenario. The revenue-sharing agreement is able to create coordination among the MSC members and optimize profitability and sustainability. The established revenue-sharing guarantees a Pareto-improving situation for both members. Applying the established contract not only reduces shortage occasions but also results in more sustainability levels, which in turn means movement toward attaining sustainable economic development goals.

Unlike previous studies, carbon emission is assumed as a nonlinear decreasing function of the sustainability level which is a more realistic case. In accordance with SMMEs business environments, the market demand is also assumed uncertain. In addition, instead of assuming an investment cost for sustainability, the authors assumed unit production/purchasing costs as functions of product sustainability level.

This study develops the economic rationale for the inclusion of new environmental financial assets, tradable pollution rights, in a well‐diversified portfolio. These new assets are generated and their valuation determined in the market‐incentive environmental regulatory approach called emissions trading, especially the cap‐and‐trade variant. This approach has been gaining wide acceptance and approval. A leading example is the sulfur dioxide market where tradable allowances are assets that may be held by private investors. Transactions in this market have reached volumes indicative of a high degree of liquidity. Comparable tradable rights in other pollutants are under active development. We explain the design and workings of these markets and demonstrate empirically, on the basis of time series data, that sulfur dioxide allowances have rates of return and yield distributions that make them candidates for inclusion in asset portfolios. We conjecture that other tradable pollution rights will exhibit similar properties when sufficient data are available. Financial analysts and accountants are likely to play an increasing role in advising investors about the role of these assets in a well‐diversified portfolio.

The paper reviews current experience with water quality trading programs and evaluates trading's potential as a future water quality management tool. The relative virtues of cap and trade (CAT) versus regulatory offset programs are discussed, as are administrative and technical barriers to trading. Several existing trade programs are discussed in detail. The article places particular emphasis on the relationship between water quality trading and watershed-based regulatory initiatives such as the total maximum daily load program.

This paper aims to calibrate carbon price trajectories that maximize social welfare where banking and borrowing rules are applied.

Typically, there has been a consensus that banking and borrowing rules within the cap-and-trade system improve social welfare. This additional flexibility can achieve compliance cost smoothing by transferring carbon permits inter-temporally; however, there is also a side effect. Regulated agents have the freedom to escape from the given emissions limit by reallocating previously granted permits.

The market system’s flexibility can cause environmental damage by deviating annual or periodic emission limits, which can invalidate the original purpose of cap-and-trade. This paper demonstrates how the socially desirable price trajectory differs from the one that favors the private sector.

Few studies have focused on the negative effects of combining the cap-and-trade with the inter-temporal regulation (banking and borrowing), which most policymakers and regulated firms can easily miss.