Analysis Of The EU Carbon Financial Risk Prevention Mechanisms

As global climate problems concerned, more and more carbon financial marketshave been established, and its capacity expands gradually. However, carbon financialrisks are revealed constantly at the same time, and the normal operation ofcarbon-financial market has suffered in the block.EU is currently the world’s largest energy consumer body, the second largestenergy importer, and is also a pioneer in carbon emissions. In2003, the EuropeanCommission announced the establishment of the EU Emissions Trading System (EUETS), and began the formal implementation in2005. The system uses "limitedquota-trade" principle, implement mandatory membership, mandatory emissionreduction, and decentralized governance model, which covering30Europeancountries (including27EU Member States) and about11000major sources ofemissions, is the world’s first multinational "group mode" emissions trading schemeand also a central component of EU climate policy. Through seven years of constantpractice and change, The EU emissions trading system as the core of the EU carboncurrent global financial market has developed into the largest financial markets incarbon, has accumulated a wealth of practical experience in institution building,market operation, and risk control, provide a useful guide and reference for the othercarbon market. China, as the world’s largest carbon emitter, is under increasinginternational political pressure and economic pressure, but the domestic carbonfinance market has just started, the carbon of the financial system has not yet beenfully established. Safeguards is not perfect, and the whole bunch of carbon market isin risk.In this paper, I defined the concepts of carbon market, carbon finance, andcarbon financial market, and then I discussed the formation and classification ofcarbon financial risks. I analysized the institutional basis of EU carbon financialmarket system, EU ETS’s system design, principle and implementation of the system，its trading platform and phishing fraud, market manipulation, VAT fraud, the carbonprice imbalances risk facing by EU carbon financial market system. I analyzed the current EU carbon financial market risks and its risk prevention mechanisms duringthe following three aspects: the risk monitoring, risk control and risk response. Isummarized some risk prevention and control measures such as Separate TradingSystem (CITL), carbon emissions monitoring system, the Carbon Disclosure Project(CDP), national quotas plan (NAP), carbon emissions verification system, carbonfinance system construction, common registration system, the abuse of marketregulation, carbon identification system, the reverse charge VAT, spot OTC markettrading, price flexibility mechanisms, and so on. Finally, based on the former analysisof EU carbon market, this paper combined with the imperfect current market situationof carbon finance for policy system, carbon financial system lag, the lack ofknowledge of the subject transaction, the missing of pricing and other issues, andmade several advices to our own carbon market at the following aspects: to improvethe carbon build financial transaction system, to promote international cooperation incarbon finance markets, to nurture and strengthen the intermediary market riskprevention capacity building, and strengthening personnel training.