PGP Term 4

GCNBNT
Quiz 2 – Answer key
1. (a) What is carbon emission trading and explain how does a carbon trading system work
in terms of an exchange. What is an efficient CO2 emission trading mechanism? (4)
Carbon emission trading is a system where carbon allowances or carbon permits are traded
in an exchange by sellers and buyers. The meeting of supply and demand for the permits
creates their price. An efficient carbon market is where the gap between ask and bid prices
for carbon permits is minimized. If explained in terms of cap and trade mechanism, marks
have been given based on the explanation provided:
Cap and trade mechanism sets a mandatory limit or cap on GHG emissions on a predefined
set of emission sources. Entities whose emissions exceed their allocations may purchase
excess allowances or other eligible instruments to fill the gap, or pay a fine. Caps can be
tightened over time to promote further emission reductions. When MAC > P there will be
demand for permits resulting in increasing price for the permits. When MAC < P there will
less demand for permits which causes price to fall, resulting in little reduction in carbon
emissions.
(b) When does the social cost of carbon exceed its private costs? How does an efficient
emission trading ensure that the social costs of carbon emissions are paid for by the
polluter? Explain (3)
The social cost of carbon is the marginal cost of emitting one extra tonne of GHG. It is the
sum of private costs and external costs. When the external cost > 0, social costs exceeds
private costs.
When the Marginal abatement cost (MAC) of CO2 is greater than Carbon Permit Price (MAC
> P) it ensures that the polluter buys permits and pay for the social cost of carbon emission.
Emission trading that is efficient ensures that the MAC = Carbon Permit Price
2. (a) What is fiduciary responsibility? How is it connected to Trustee approach to fund
management? (3)
A fiduciary is a person or organization that owes to another the duties of good faith and
trust. Fund management that is based on fiduciary principles seek to ensure that the social
and environmental goals of a fund based on equitable access and effective solution to the
commons problem, is addressed to the satisfaction of the principle.
(b) Why is the Global Environmental Facility (GEF) called a Trust Fund? How is it different
from the Asian Development Bank in terms of operational management? (3)
GEF is called a Trust fund as its corpus is held in Trust by a Trustee agency which is the
World Bank. The Trustee helps mobilize GEF resources; disburses funds to GEF Agencies;
prepares financial reports on investments and use of resources; and monitors application of
budgetary and project funds. 
The Asian Development Bank is a multilateral development bank institution that is based on
providing returns to its share/quota holders. The Board of Governors is the highest decision
making authority, and each member country has its own governor. It is not based on
trusteeship or fiduciary responsibility ideals.

3. (a) How is the mandate (mission) of the World Bank different from the IMF? What is the
difference in their approach to a global commons problem like Climate Change? (3)
The International Monetary Fund (IMF) seeks to foster global monetary cooperation, secure
financial stability, facilitate international trade, promote high employment and sustainable
economic growth. The World Bank seeks to reduce poverty by offering assistance to middle-
income and low-income countries.
The IMF approaches climate change from the angle of macroeconomic fiscal policies like
providing financial resources for balancing deficits to member countries and policy
guidelines on mitigation (increasing carbon taxes to reduce emission), adaptation and
transition to a low carbon economy while the World Bank approaches climate change as a
development and environmental problem that needs resolution by providing loans and
grants to country level programmes and project.

(b) What is the difference between the voting rights enjoyed by a World Bank member
country like India in decision making as compared to our voting rights in the United
Nations General Assembly? (3)
In the World Bank each country receives votes consisting of share votes (one vote for each
share of the Bank's capital stock held by the member) plus basic votes. Each member
country’s voting share is weighted on the basis of its cumulative financial contributions
and commitments to the organization. This gives countries with more share votes a
greater say in the governance of the bank.
The voting power of the United States is large enough to veto major policy decisions at the
World Bank and the IDB. However, the United States cannot unilaterally veto more day-to-
day decisions, such as individual loans
The UNGA system provides for ‘’one country, one vote’’ system where every country (big or
small) has equal rights as any other country.

4. (a) What is the objection to a cyborg filing for a patent on her innovation? (3)
The argument against cyborgs filing an application is that Cyborgs cannot be treated as
inventors as they are not natural persons.
(b) Are Youtube clips copyrighted? Can I stream them in GCNBNT classes without inviting
trouble? Why? (3)
Yes, they are copyrighted by people who upload content that is new and creative.
Yes I can, since streaming them in a classroom as part of teaching is a part of fair use as per
India’s Copyright Act