Securitization to reduce CO2 emission

Main Article Content

DongHoon Shin
Changhui Choi
Changki Kim


We consider CO2 emission-backed securities designed as a securitization based on national CO2 emissions. We constructed the securities using data from “CO2 Emissions from Fuel Combustion” of the International Energy Agency. The securities consist of several tranches with specific coupon rates determined by each nation’s probability of threshold (or target emission) achievement. These securities can be traded in financial markets without the interference of other countries and would give countries an incentive to reduce their CO2 emissions. This study also suggests a financial environmental cleanliness measure for each country using the concept of “green spread” for single-tranche securities.


Download data is not yet available.


Metrics Loading ...

Article Details

How to Cite
Shin, D., Choi, C., & Kim, C. (2018). Securitization to reduce CO2 emission. International Journal for Innovation Education and Research, 6(5), 52-76. Retrieved from
Author Biography

DongHoon Shin, Inha University

Department of Global Finance and Banking


Abrell, J., A. Ndoye, and G. Zachmann, Assessing the impact of the EU ETS using firm level data. Bruegel Working Paper, Brussels, Belgium, 2011.

Anderson, B. and C. Di Maria, Abatement and Allocation in the Pilot Phase of the EU ETS, Environment Resource Economics, 48: 83-103, 2011.

Auffhammer, M., and Carson, R. T. (2007).Forecasting the Path of China’s CO2 Emissions Using Province Level Information. UC Berkeley: Department of Agricultural and Resource Economics. Working Paper.

Banks, E. (2004) “Alternative Risk Transfer: Integrated Risk Management through Insurance, Reinsurance, and the Capital Markets.” Chichester, England: Wiley.

Center for American Progress, 2008, “Cap and Trade 101,” Available at

Chevallier, J., Y. L. Pen and B. Sévi (2009). “Options introduction and volatility in the EU ETS,” Available at SSRN:

Den Elzen, M. G., Meinshausen, M. Multi-gas emission pathways for meeting the EU 2 degree C climate target, Schellnhuber, H. J., Cramer, W., Nakicenovic, N., Wigley, T. and Yohe, G. “Avoiding dangerous climate change.” Cambridge: Cambridge University Press, pp. 323-331.

Deutsche Börse and Eurex (2008) “The Global Derivatives Market—An Introduction.” Deutsche Börse and Eurex White Paper, Retrieved on November 21.

Ellerman, A. D., F. J. Convery, and C. De Perthuis, 2010, Pricing carbon: the European Union emissions trading scheme. Cambridge University Press, 2010.

Gilbertson, T. and O. Reyes, Carbon trading: How it works and why it fails, Critical Current, Dag Hammarskjöld Foundation, Number 7, 2009.

Hepburn, C. (2007) "Carbon Trading: A Review of the Kyoto Mechanisms." Annual Review of Environment and Resources 32: 375-393

Jones, C. D., Cox, P. M. and Huntingford, C. (2006) "Impact of climate-carbon cycle feedbacks on emissions scenarios to achieve stabilization." Avoiding Dangerous Climate Change. J. S. Schellnhuber, W. Cramer, N. Nakicenovic, T. M. L. Wigley and G. Yohe. Cambridge, Cambridge University Press.

Kossoy, A., and Ambrosi, P. (2010). “State and trends of the carbon market 2010.” Washington, DC: World Bank.

Linacre, N., Kossoy, A., and Ambrosi, P. (2011). “State and trends of the carbon market 2011.” Washington, DC: World Bank

Martin, R., M. Muûls and U. Wagner, An evidence review of The EU Emission Trading System, focusing on effectiveness of the system in driving industrial abatement, Technical Report, Center for Economic Performance (CEP), London School of Economics and Political Science, 2012.

Schneider, S. H. and Mastrandrea, M. D., Probabilistic assessment of “dangerous” climate change and emissions pathways, Proc. Natl. Acad. Sci. USA., November 1; 102(44): 15728-15735, 2005.

Solomon, S., Qin, D., Manning, M., Chen, Z., Marquis, M., Averyt, K. B., Tignor, M. and Miller, H. L., ed. (2007). “Climate Change 2007: The Physical Science Basis, Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change.” Cambridge, Cambridge University Press.

Stainforth, D., Allen, M., Frame, D. and Piani, C. (2006). “Risks associate with stabilization scenarios and uncertainty in regional and global climate change impacts.” Avoiding Dangerous Climate Change. J. S. Schellnhuber, W. Cramer, N. Nakicenovic, T. M. L. Wigley and G. Yohe. Cambridge, Cambridge University Press.

The Guardian, Canada pulls out of Kyoto protocol, The Guardian (UK). December 13, 2011.

Steinhauser, R. and Auffhammer, M. (2005).Forecasting US CO2 Emissions Using State-Level Data. UC Berkeley: University of California International and Area Studies.