EXECUTIVE SUMMARIES



Embeddedness in a network of relationships, both horizontally (institutions that give
guidance, monitoring by chain partners etc.) as well as vertically (regular visits of
governmental agents, covenants etc.) seem to promote corporate environmental
performance. Governmental agencies should keep close ties with companies on a basis
of mutual respect and cooperation, so that performance (measured by regarding
information given and environmental care) is improved.

Managers should be open to advise and keep close relationships with companies in the
same branch and/or with governmental agencies, and seek (in coming up to public
environmental demands) for synergy with normal business operations, so that ‘pollution
prevention pays’.

Carbon Market: Business Incentives for Sustainability

Marco Antonio Conejero, Elizabeth M.M.Q. Farina

Making use of the teachings of Nobel Prize Ronald Coase in his work “The Problem of
Social Cost”, this paper has as a research problem to study the definition process of the
property rights and institutional change to creation and development of the carbon
market.

The Protocol resulting from the 1997 Conference of Parties in Kyoto finally set emission
caps for several developed countries and introduced the possibility of market creation
mechanisms based on carbon emission trading. The Clean Development Mechanism
(CDM) was then created for emission trading between countries with caps and those
with no caps. The CDM market will pursue the opportunities for lowest costs on carbon
reductions available in each country with no emission target, as is the case of Brazil.
But the positive differentials of Brazil will only be realized if there is, mainly in national
terms, a clear institutional guidance of support to the consistent initiatives of CDM
projects.

According to Coase (1960), if property rights are clearly assigned and the transaction
costs are sufficiently low, the parties will negotiate freely rights to pollute and they will
achieve the economic optimum. Our hypothesis is that, specifically in Brazil, property
rights are not well defined raising transaction costs. Through the light of theoretical
concepts, we have prepared a questionnaire that led the interviews with five pioneer
companies of Brazil in CDM projects to identify the main sources of high transaction
costs. At the present stage of development of this market, these companies make up a
representative sample showing the Brazilian companies that dared in prospecting the
activity of GHG mitigation.



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