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Sustainable low-carbon development: turning point in global economy
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Gaidutskiy Ivan, PhD in Economics, researcher at management and marketing faculty, research laboratory of national technical university of Ukraine,
"Kyiv Polytechnic Institute" E-mail: ivan.gaid@gmail.com
Sustainable low-carbon development: turning point in global economy
Abstract: The threatening increase of human impact on the climate took place during the period of the global economy industrial development. It has been already proved that the warming by over 2 °C can lead to catastrophic climate changes. To avoid this it is necessary to reduce greenhouse gas emissions (equivalent to carbon emissions (Hereinafter)) by 50 % during the next 20 years and by 85 % — within the next 50 years. To do this, the society must urgently move to a model of sustainable development, which stipulates the economy growth provided the reduction of carbon emissions. An important condition for solving this problem is the introduction of an effective system to promote sustainable low-carbon development. This is possible by creating an incentive system that would combine stimulating and forcing measures in influencing businesses and encouraging their ecologically friendly behaviour. The overall system of such incentives covers at least four cooperating institutions: international environmental organisations; national state governments; transnational corporations (TNCs), and consumers. Harmonisation of economic and environmental interests of such businesses and consolidation of their efforts is capable of ensuring the facilitation of sustainable low-carbon development.
Keywords: sustainable development; low-carbon development; globalisation; anti-carbon tools.
The most complete and comprehensive research of the problems related to the threatening human impact on climate has been provided in the Report of the World Commission on Environment and Development: Our Common Future [1]. This issue has been also studied to this or that extent in the works of many scientists, in particular: N. Andreieva [2]; B. Burkynskyi [3]; O. Veklych [4]; A. Prokopenko [5]; T. Tunytsia [6]; Yu. Tunytsia [7]; S. Kharichk-ov [8]; M. Khvesyk [9]. However, these studies were mostly of segment and sector character. We lack comprehensive research and theoretical and methodological development of proposals regarding the solving of the problem of creating a global incentive system for sustainable low-carbon development thus proving the rationale of this article.
The anthropogenic impact on the environment is estimated at the level of 95 % of the climate change risks. This is primarily due to the rapid growth of carbon emissions, which significantly outpaced the growth of population and economy. To the greatest extent this was due to the rapid development of carbon-rich energy, which accounts for 80 % of the volume of all carbon emissions. In turn, the growth of carbon energy was due to its increased funding by the state. Carbon energy funding is in fact the funding of carbon emissions that create global catastrophic threat to the climate. Moreover, studies have shown that carbon energy funding is opportunistic and
does not contribute to any improvement in the energy availability or energy security, stability, or environmental sustainability. State funding of carbon energy is a terrible manifestation of the contradictions of national economic and global environmental objectives.
The transition to sustainable low-carbon development can be a success through the implementation of the global economy energy conversion. However, energy conversion requires effective financial support. In many countries where such support is provided (mostly in the EU) there is good progress in economy energy conversion. Moreover, such countries are characterised by significantly better energy availability, security, stability, and environmental sustain-ability. However, in many countries such funding is very low, thus resulting in high intensity of carbon emissions. But the most paradoxical is the fact that many countries have dualistic policy: funding the carbon energy and the carbon-free one simultaneously. This once again demonstrates the inability to address this issue at the national level and the need to implement a global incentive doctrine for sustainable low-carbon development.
A tax mechanism is a generally accepted effective way to mobilize the financial resources. The advantages of such a mechanism are the double effects, which are greatly acceptable to motivate low-carbon development. However, environmental taxes, which have been widely applied in the countries since the end of the twentieth
Section 13. Economics and management
century, are still far from fulfilling this task. The share of such taxes in GDP and tax payments is very low and inadequate to the economy load on the environment. The proceeds from such taxes are used to finance only a part of environmental measures. At the same time, the environmental costs are not even close to being covered by the revenues from environmental taxes. The tax base is not linked to the volume of environmental damage caused by the economy. Therefore, the existing environmental taxes do not affect the intensity of carbon emissions. We need a new paradigm of building such a tax mechanism that would become an effective tool for the global incentive system for sustainable low-carbon development.
The introduction of the Kyoto Protocol was the first international incentive mechanism for low-carbon development. However, Kyoto mechanisms had no overall positive impact on the situation with the world's carbon emissions. The global carbon emissions rose by 38.3 % over 20 years. Moreover, if in 1990-1997 the average annual growth of carbon emissions was 1 %, in 1997-2012 it was already 3 %. Developing countries were exempted from emission reduction commitments, thus they significantly increased carbon emissions. This represented the global contradictory character of the anti-carbon policy of Kyoto period. The experience in the implementation of the Kyoto mechanisms showed that:
1) differentiation of approaches led to the opportunistic behaviour of the countries;
2) the opportunistic character of the anti-carbon policy has caused injustice in the investment: countries that received most investments under the Kyoto mechanisms (where China received the major share) had the greatest increase in carbon emissions;
3) the anti-carbon policy should be unified, global and mandatory: exemption from emission reduction commitments for some countries results in global growth of emissions and nullifies the achievements of the countries that have committed themselves to emission reduction.
Successful implementation of such tasks requires large volumes of investment. However, the forming of such an investment potential is complicated by the contradictions in the global anticarbon policy, where negative environmental impacts are global and positive economic benefits are only national. Therefore, the national economic benefits aggrieve the investment incentives for low-carbon development. Thus, the global benefits from the anticarbon economy modernization determine the need for growing foreign investments into this sector. In today's world there are many different funds, TNCs, banks, insurance companies, and other institutions with large capital. However, their share in the low-carbon development investment is very small. This is due to the lack of an effective incentive system to motivate the investments of their capital in this area. So we need a global incentive system for sustainable low-carbon development.
In a global environment of a sustainable low-carbon development Ukraine also finds itself in a paradoxical position. On the one
hand, it refers to a group of countries, which have very high energy and carbon capacity economy, high consumption of carbon supplies, and depends much on their import. On the other hand, Ukraine is positioned among the world countries with very low energy conversion of the economy and low development of renewable (carbon-free) energy if provided with enough opportunities to do so. Ukraine has a great potential to reduce carbon capacity of its economy primarily due to: 1.5-2 times energy conservation; modernization ofproduction capacities (1.5-2 times); due to energy innovations Ukraine can achieve the replacement of the one third of carbon energy sources with carbon-free ones by 2030 and reduce the carbon capacity of the country's GDP by one third. Therefore, Ukraine urgently needs the incentive system for low-carbon development with double influence effect and aimed at both ensuring (forcing) a significant reduction in carbon emissions and encouraging of investments into energy conversion.
The investment process in the field of low-carbon development in Ukraine is rather opportunistic. The dynamics of domestic budgetary investment in this area is very unstable, and the amounts are far from sufficient. The participation of private capital in investments into this sector is very low. On the one hand, this is due to the low investment image of the sector, and on the other hand, due to low motivation for investors. The signing of the Kyoto Protocol by Ukraine, which had a large surplus of emission quotas, gave the country a big chance to attract significant amounts of foreign funds. However, this opportunity has not been taken, first because of the delay in the ratification of the Kyoto Protocol and then due to the delay in attracting investors to the Kyoto mechanisms. As a result, Ukraine has lost time and the potential to sell the surplus savings of carbon credits, having used just 20 % of such an opportunity. This showed the conservatism of the Ukrainian anti-carbon policy, which led to the loss of large foreign investment opportunities within the great potential of investment capacity and attractiveness of the Ukrainian economy.
The duality in state support of carbon and carbon-free energy creates a serious problem for the forming of incentives for low-carbon development in Ukraine. According to the IMF, the state support for carbon and carbon-free energy in all industries in Ukraine is about 17 % of GDP. With this figure, Ukraine ranked 17th in the anti-rating among 134 countries surveyed. At the same time, the level of state support for renewable energy (also in all industries) reaches less than 0.08 % of GDP (one of the lowest places among the countries surveyed). The ratio of the amount of state support for renewable (carbon-free) energy to the carbon one is 0.5 %. This is the lowest figure among European countries. Therefore, it is fundamentally important for Ukraine to eliminate contradictions and duality in the system of state energy funding. In view of these shortcomings of the state support system for the energy sector in Ukraine, the conceptual provisions of the proposed global incentive system for sustainable low-carbon development can be quite acceptable.
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Improving management of risks related to international operations in bank engineering
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Davronov Shuhrat Zuhurovich, Independent researcher, Banking and Finance Academy of the Republic of Uzbekistan
E-mail: aoteuliev@gmail.com
Improving management of risks related to international operations in bank engineering
Abstract: This article describes main risks associated with international operations in banking engineering practice. There is a review of the situation on the international market in this area. It is concluded to use the concept ofVaR method for the objective estimation of the risks of commercial banks.
Keywords: banking engineering, banking risks, credit risk, liquidity risk, legal risk, strategic risk, reputation loss risk.
While the economy is globalizing all over the world, the activity of banks is also expanding. Expansion of the banks' activities is connected with the fact that, first of all, banks offer services for foreign economic activities of the clients and, banks start their performance in the world financial markets. Therefore, international activity ofthe bank can comprise ofdifferent aspects such as foreign exchange operations, lending, accounting, fund and guarantee operations. Clients of the bank can be both residents and non-residents of the country and it, in turn, raises probability of risks.
The difference of bank's internal operations from its international operations is that more sources of risks can occur in the international performance. The participants of these operations can include a client, a bank itself and a foreign representative office. All
above-mentioned statements prove the urgency to study not only national participants of international operations, but also foreign participants with the account of factors of risks which can occur.
The global factor of raising the risks in international activity of banks is reduction of the volume of operations on the best assets and liabilities from the liquidity point of view and increase of the operations related to capital mitigation, in particular, increase of the volume of virtual operations with securities. Rapidly increasing number of virtual agreements in the world financial markets can result in financial fluctuations and it, in its turn, in conditions of interconnection of economic liberalization and national economy is extending weaknesses of international bank operations like chain reaction.
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Fig. 1. Illegal (hidden) operations in some countries (for 2012, in trillion USD) [10]
Fig. 2. Illegal (hidden) financial and bank operations performed via offshore zones (2012, in relations to GDP, %) [10]
