An Emissions Trading Scheme

question 8

Multiple Choice

An emissions trading scheme:

• A) allows the trade of excess emissions permits.
• B) can also be referred to as a 'cap and trade' scheme.
• C) usually involves substantial fines for excessive polluters.
• D) All of the above.

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Definitions:

Financial Instrument

A contract that leads to the creation of a financial asset for one party and results in a financial liability or equity instrument for another party.

Market Risk

The risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates, market interest rates or some other market prices.

Credit Risk

The risk of loss due to a borrower's failure to make payments on any type of debt.

Liquidity Risk

The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.