114-646: As of June 2013, there are 192 parties to the Kyoto Protocol to the United Nations Framework Convention on Climate Change , which aims to combat global warming . This total includes 191 states (189 United Nations member states as well as the Cook Islands and Niue ) and one supranational union (the European Union ). Canada renounced the protocol effective 15 December 2012 and ceased to be
228-489: A " perfect storm " that triggered the Great Recession , which lasted from late 2007 to mid-2009. The financial crisis began in early 2007, as mortgage-backed securities (MBS) tied to U.S. real estate , as well as a vast web of derivatives linked to those MBS, collapsed in value . Financial institutions worldwide suffered severe damage, reaching a climax with the bankruptcy of Lehman Brothers on September 15, 2008, and
342-655: A country (such as the US) running a current account deficit also have a capital account (investment) surplus of the same amount. Hence large and growing amounts of foreign funds (capital) flowed into the U.S. to finance its imports. All of this created demand for various types of financial assets, raising the prices of those assets while lowering interest rates. Foreign investors had these funds to lend either because they had very high personal savings rates (as high as 40% in China) or because of high oil prices. Ben Bernanke referred to this as
456-447: A further collapse, encourage lending, restore faith in the integral commercial paper markets, avoid the risk of a deflationary spiral , and provide banks with enough funds to allow customers to make withdrawals. In effect, the central banks went from being the " lender of last resort " to the "lender of only resort" for a significant portion of the economy. In some cases the Fed was considered
570-433: A given stabilization level, larger emissions reductions in the near term allow for less stringent emissions reductions later. On the other hand, less stringent near term emissions reductions would, for a given stabilization level, require more stringent emissions reductions later on. The first period Kyoto emissions limitations can be viewed as a first-step towards achieving atmospheric stabilization of GHGs. In this sense,
684-488: A global economic shock, resulting in several bank failures . Economies worldwide slowed during this period since credit tightened and international trade declined. Housing markets suffered and unemployment soared, resulting in evictions and foreclosures . Several businesses failed. From its peak in the second quarter of 2007 at $ 61.4 trillion, household wealth in the United States fell $ 11 trillion, to $ 50.4 trillion by
798-479: A housing bubble to replace the Nasdaq bubble". Moreover, empirical studies using data from advanced countries show that excessive credit growth contributed greatly to the severity of the crisis. Additional downward pressure on interest rates was created by rising U.S. current account deficit, which peaked along with the housing bubble in 2006. Federal Reserve chairman Ben Bernanke explained how trade deficits required
912-500: A hypothetical baseline of emissions. Only emission reduction projects that do not involve using nuclear energy are eligible for accreditation under the CDM, in order to prevent nuclear technology exports from becoming the default route for obtaining credits under the CDM. Each Annex I country is required to submit an annual report of inventories of all anthropogenic greenhouse gas emissions from sources and removals from sinks under UNFCCC and
1026-571: A member from that date. With the Protocol's 2008-2012 commitment period expiring, the Doha Amendment to the Kyoto Protocol was agreed to, which establishes new commitments for the period 2013–2020. As of October 2020, 147 states have accepted this amendment. Signing is optional, indicating an intention to ratify the Protocol. Ratification means that a state is legally bound by the provisions of
1140-655: A quantitative total limit on the emissions produced by all participating emitters, which correspondingly determines the prices of emissions. Under emission trading, a polluter having more emissions than their quota has to purchase the right to emit more from emitters with fewer emissions. This can reduce the competitiveness of fossil fuels , which are the main driver of climate change . Instead, carbon emissions trading may accelerate investments into renewable energy , such as wind power and solar power . However, such schemes are usually not harmonized with defined carbon budgets that are required to maintain global warming below
1254-809: A range of measures intended to preserve existing jobs and create new ones. Combined, the initiatives, coupled with actions taken in other countries, ended the worst of the Great Recession by mid-2009. Assessments of the crisis's impact in the U.S. vary, but suggest that some 8.7 million jobs were lost, causing unemployment to rise from 5 percent in 2007 to a high of 10 percent in October 2009. The percentage of citizens living in poverty rose from 12.5 percent in 2007 to 15.1 percent in 2010. The Dow Jones Industrial Average fell by 53 percent between October 2007 and March 2009, and some estimates suggest that one in four households lost 75 percent or more of their net worth . In 2010,
SECTION 10
#17328338167601368-545: A really bad economy. In other words, the borrowers did not cause the loans to go bad-it was the economy. Between 1998 and 2006, the price of the typical American house increased by 124%. During the 1980s and 1990s, the national median home price ranged from 2.9 to 3.1 times median household income. By contrast, this ratio increased to 4.0 in 2004, and 4.6 in 2006. This housing bubble resulted in many homeowners refinancing their homes at lower interest rates, or financing consumer spending by taking out second mortgages secured by
1482-420: A second commitment period. The first period emission reduction commitments expired on 31 December 2012. The first-round Kyoto emissions limitation commitments were not sufficient to stabilize the atmospheric concentration of GHGs. Stabilization of atmospheric GHG concentrations will require further emissions reductions after the end of the first-round Kyoto commitment period in 2012. The ultimate objective of
1596-404: A significant increase in subprime lending . Subprime had not become less risky; Wall Street just accepted this higher risk. Due to competition between mortgage lenders for revenue and market share, and when the supply of creditworthy borrowers was limited, mortgage lenders relaxed underwriting standards and originated riskier mortgages to less creditworthy borrowers. In the view of some analysts,
1710-489: A single pool from which specific securities draw in a specific sequence of priority. Those securities first in line received investment-grade ratings from rating agencies. Securities with lower priority had lower credit ratings but theoretically a higher rate of return on the amount invested. By September 2008, average U.S. housing prices had declined by over 20% from their mid-2006 peak. As prices declined, borrowers with adjustable-rate mortgages could not refinance to avoid
1824-551: A subsequent international banking crisis . The prerequisites for the crisis were complex. During the 1990s, the U.S. Congress had passed legislation intended to expand affordable housing through looser financing. In 1999, parts of the Glass–Steagall legislation (passed in 1933) were repealed , permitting institutions to mix low-risk operations, such as commercial banking and insurance , with higher-risk operations such as investment banking and proprietary trading . As
1938-592: A surplus of allowances, while many OECD countries have a deficit. Some of the EITs with a surplus regard it as potential compensation for the trauma of their economic restructuring. When the Kyoto treaty was negotiated, it was recognized that emissions targets for the EITs might lead to them having an excess number of allowances. This excess of allowances were viewed by the EITs as "headroom" to grow their economies. The surplus has, however, also been referred to by some as "hot air",
2052-431: A term which Russia (a country with an estimated surplus of 3.1 billion tonnes of carbon dioxide equivalent allowances) views as "quite offensive". OECD countries with a deficit could meet their Kyoto commitments by buying allowances from transition countries with a surplus. Unless other commitments were made to reduce the total surplus in allowances, such trade would not actually result in emissions being reduced (see also
2166-697: Is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability. In the table, the names of emerging and developing economies are shown in boldface type, while the names of developed economies are in Roman (regular) type. The twenty largest economies contributing to global GDP (PPP) growth (2007–2017) The expansion of central bank lending in response to
2280-505: Is that the marginal cost of reducing (or abating) emissions differs among countries. "Marginal cost" is the cost of abating the last tonne of CO 2 -eq for an Annex I/non-Annex I Party. At the time of the original Kyoto targets, studies suggested that the flexibility mechanisms could reduce the overall ( aggregate ) cost of meeting the targets. Studies also showed that national losses in Annex I gross domestic product (GDP) could be reduced by
2394-575: The Dodd–Frank Wall Street Reform and Consumer Protection Act was passed, overhauling financial regulations. It was opposed by many Republicans , and it was weakened by the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018. The Basel III capital and liquidity standards were also adopted by countries around the world. The recession was a significant factor in the 2010s European debt crisis . The crisis sparked
SECTION 20
#17328338167602508-475: The European Union (and its then 28 member states , now 27), Belarus , Iceland , Kazakhstan , Liechtenstein , Norway , Switzerland , and Ukraine . Belarus, Kazakhstan, and Ukraine stated that they may withdraw from the Kyoto Protocol or not put into legal force the Amendment with second round targets. Japan, New Zealand , and Russia had participated in Kyoto's first-round but did not take on new targets in
2622-643: The Federal Reserve ("Fed") lowered the federal funds rate from 2000 to 2003, institutions increasingly targeted low-income homebuyers, largely belonging to racial minorities , with high-risk loans; this development went unattended by regulators. As interest rates rose from 2004 to 2006, the cost of mortgages rose and the demand for housing fell, causing property values to decline. In early 2007, as more U.S. mortgage holders began defaulting on their repayments, subprime lenders went bankrupt, culminating in April with
2736-469: The Federal Reserve lowered the federal funds rate target from 6.5% to 1.0%. This was done to soften the effects of the collapse of the dot-com bubble and the September 11 attacks , as well as to combat a perceived risk of deflation . As early as 2002, it was apparent that credit was fueling housing instead of business investment as some economists went so far as to advocate that the Fed "needs to create
2850-659: The Great Depression . This matters for credit decisions. A homeowner with equity in her home is very unlikely to default on a car loan or credit card debt. They will draw on this equity rather than lose their car and/or have a default placed on their credit record. On the other hand, a homeowner who has no equity is a serious default risk. In the case of businesses, their creditworthiness depends on their future profits. Profit prospects look much worse in November 2008 than they did in November 2007 ... While many banks are obviously at
2964-667: The Great Recession , which, at the time, was the most severe global recession since the Great Depression. It was also followed by the European debt crisis, which began with a deficit in Greece in late 2009, and the 2008–2011 Icelandic financial crisis , which involved the bank failure of all three of the major banks in Iceland and, relative to the size of its economy, was the largest economic collapse suffered by any country in history. It
3078-545: The United States House Committee on Financial Services held a hearing, at the urging of the administration, to assess safety and soundness issues and to review a recent report by the Office of Federal Housing Enterprise Oversight (OFHEO) that had uncovered accounting discrepancies within the two entities. The hearings never resulted in new legislation or formal investigation of Fannie Mae and Freddie Mac, as many of
3192-414: The global financial crisis ( GFC ), was the most severe worldwide economic crisis since the 1929 Wall Street crash that began the Great Depression . Causes of the crisis included predatory lending in the form of subprime mortgages to low-income homebuyers and a resulting housing bubble , excessive risk-taking by global financial institutions , and lack of regulatory oversight, which culminated in
3306-498: The mortgage-backed security and the collateralized debt obligation that were assigned safe ratings by the credit rating agencies . In effect, Wall Street connected this pool of money to the mortgage market in the US, with enormous fees accruing to those throughout the mortgage supply chain , from the mortgage broker selling the loans to small banks that funded the brokers and the large investment banks behind them. By approximately 2003,
3420-403: The "buyer of last resort". During the fourth quarter of 2008, these central banks purchased US$ 2.5 (~$ 3.47 trillion in 2023) trillion of government debt and troubled private assets from banks. This was the largest liquidity injection into the credit market, and the largest monetary policy action in world history. Following a model initiated by the 2008 United Kingdom bank rescue package ,
3534-722: The 2008 financial crisis, consumer regulators in America have more closely supervised sellers of credit cards and home mortgages in order to deter anticompetitive practices that led to the crisis. At least two major reports on the causes of the crisis were produced by the U.S. Congress: the Financial Crisis Inquiry Commission report, released January 2011, and a report by the United States Senate Homeland Security Permanent Subcommittee on Investigations entitled Wall Street and
List of parties to the Kyoto Protocol - Misplaced Pages Continue
3648-727: The 2015 adoption of the Paris Agreement , which is a separate instrument under the UNFCCC rather than an amendment of the Kyoto Protocol. 1992 – The UN Conference on the Environment and Development is held in Rio de Janeiro. It results in the Framework Convention on Climate Change (UNFCCC) among other agreements. 1995 – Parties to the UNFCCC meet in Berlin (the 1st Conference of Parties (COP) to
3762-555: The CDM and JI can be used by Annex I Parties in meeting their emission limitation commitments. The emission reductions produced by the CDM and JI are both measured against a hypothetical baseline of emissions that would have occurred in the absence of a particular emission reduction project. The emission reductions produced by the CDM are called Certified Emission Reductions (CERs); reductions produced by JI are called emission reduction units (ERUs). The reductions are called " credits " because they are emission reductions credited against
3876-638: The CDM. Russia accounts for about two-thirds of these savings, with the remainder divided up roughly equally between Ukraine and the EU's New Member States. Emission savings include cuts in methane, HFC, and N 2 O emissions. The agreement is a protocol to the United Nations Framework Convention on Climate Change (UNFCCC) adopted at the Earth Summit in Rio de Janeiro in 1992, which did not set any legally binding limitations on emissions or enforcement mechanisms. Only Parties to
3990-519: The CRA. They contend that there were two, connected causes to the crisis: the relaxation of underwriting standards in 1995 and the ultra-low interest rates initiated by the Federal Reserve after the terrorist attack on September 11, 2001. Both causes had to be in place before the crisis could take place. Critics also point out that publicly announced CRA loan commitments were massive, totaling $ 4.5 trillion in
4104-523: The Caribbean make up 15% of the potential total, with Brazil as the largest producer in the region (7%). The formal crediting period for Joint Implementation (JI) was aligned with the first commitment period of the Kyoto Protocol, and did not start until January 2008 (Carbon Trust, 2009, p. 20). In November 2008, only 22 JI projects had been officially approved and registered. The total projected emission savings from JI by 2012 are about one tenth that of
4218-495: The Doha Amendment. It entered into force on 31 December 2020, following its acceptance by the mandated minimum of at least 144 states, although the second commitment period ended on the same day. Of the 37 parties with binding commitments, 34 had ratified. Negotiations were held in the framework of the yearly UNFCCC Climate Change Conferences on measures to be taken after the second commitment period ended in 2020. This resulted in
4332-480: The Financial Crisis: Anatomy of a Financial Collapse , released April 2011. In total, 47 bankers served jail time as a result of the crisis, over half of which were from Iceland , where the crisis was the most severe and led to the collapse of all three major Icelandic banks. In April 2012, Geir Haarde of Iceland became the only politician to be convicted as a result of the crisis. Only one banker in
4446-491: The GIS is not required under the Kyoto Protocol, and there is no official definition of the term. Under the GIS a party to the protocol expecting that the development of its economy will not exhaust its Kyoto quota, can sell the excess of its Kyoto quota units (AAUs) to another party. The proceeds from the AAU sales should be "greened", i.e. channelled to the development and implementation of
4560-538: The Kyoto Protocol was to control emissions of the main anthropogenic (human-emitted) greenhouse gases (GHGs) in ways that reflect underlying national differences in GHG emissions, wealth, and capacity to make the reductions. The treaty follows the main principles agreed in the original 1992 UN Framework Convention. According to the treaty, in 2012, Annex I Parties who have ratified the treaty must have fulfilled their obligations of greenhouse gas emissions limitations established for
4674-525: The Kyoto Protocol's first commitment period (2008–2012). These emissions limitation commitments are listed in Annex B of the Protocol. The Kyoto Protocol's first round commitments are the first detailed step taken within the UN Framework Convention on Climate Change. The Protocol establishes a structure of rolling emission reduction commitment periods. It set a timetable starting in 2006 for negotiations to establish emission reduction commitments for
List of parties to the Kyoto Protocol - Misplaced Pages Continue
4788-502: The Kyoto Protocol. These countries nominate a person (called a "designated national authority") to create and manage its greenhouse gas inventory . Virtually all of the non-Annex I countries have also established a designated national authority to manage their Kyoto obligations, specifically the "CDM process". This determines which GHG projects they wish to propose for accreditation by the CDM Executive Board. Emissions trading sets
4902-483: The LMI borrowers targeted by the CRA, especially in the years 2005–2006 leading up to the crisis, nor did it find any evidence that lending under the CRA rules increased delinquency rates or that the CRA indirectly influenced independent mortgage lenders to ramp up sub-prime lending. To other analysts the delay between CRA rule changes in 1995 and the explosion of subprime lending is not surprising, and does not exonerate
5016-773: The Protocol. Annex I Parties use of forest management in meeting their targets is capped. Under the Kyoto Protocol, 37 industrialized countries and the European Community (the European Union -15, made up of 15 states at the time of the Kyoto negotiations) commit themselves to binding targets for GHG emissions. The targets apply to the four greenhouse gases carbon dioxide (CO 2 ), methane ( CH 4 ), nitrous oxide ( N 2 O ), sulphur hexafluoride ( SF 6 ), and two groups of gases, hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs). The six GHG are translated into CO 2 equivalents in determining reductions in emissions. These reduction targets are in addition to
5130-589: The SEC's December 2011 securities fraud case against six former executives of Fannie and Freddie, Peter Wallison and Edward Pinto estimated that, in 2008, Fannie and Freddie held 13 million substandard loans totaling over $ 2 trillion. In the early and mid-2000s, the Bush administration called numerous times for investigations into the safety and soundness of the GSEs and their swelling portfolio of subprime mortgages. On September 10, 2003,
5244-545: The U.S. to borrow money from abroad, in the process bidding up bond prices and lowering interest rates. Bernanke explained that between 1996 and 2004, the U.S. current account deficit increased by $ 650 billion, from 1.5% to 5.8% of GDP. Financing these deficits required the country to borrow large sums from abroad, much of it from countries running trade surpluses. These were mainly the emerging economies in Asia and oil-exporting nations. The balance of payments identity requires that
5358-539: The UNFCCC can become Parties to the Kyoto Protocol. The Kyoto Protocol was adopted at the third session of the Conference of Parties to the UNFCCC in 1997 in Kyoto, Japan. National emission targets specified in the Kyoto Protocol exclude international aviation and shipping. Kyoto Parties can use land use , land use change , and forestry (LULUCF) in meeting their targets. LULUCF activities are also called "sink" activities. Changes in sinks and land use can have an effect on
5472-470: The UNFCCC is the "stabilization of greenhouse gas concentrations in the atmosphere at a level that would stop dangerous anthropogenic interference with the climate system." Even if Annex I Parties succeed in meeting their first-round commitments, much greater emission reductions will be required in future to stabilize atmospheric GHG concentrations. For each of the different anthropogenic GHGs, different levels of emissions reductions would be required to meet
5586-498: The UNFCCC) to outline specific targets on emissions. 1997 – In December the parties conclude the Kyoto Protocol in Kyoto, Japan, in which they agree to the broad outlines of emissions targets. 2004 – Russia and Canada ratify the Kyoto Protocol to the UNFCCC bringing the treaty into effect on 16 February 2005. 2011 – Canada became the first signatory to announce its withdrawal from the Kyoto Protocol. 2012 – On 31 December 2012,
5700-409: The United States did not have wealth declines at all during the crisis because they generally did not own financial investments whose value can fluctuate. The Federal Reserve surveyed 4,000 households between 2007 and 2009, and found that the total wealth of 63% of all Americans declined in that period and 77% of the richest families had a decrease in total wealth, while only 50% of those on the bottom of
5814-480: The United States served jail time as a result of the crisis, Kareem Serageldin , a banker at Credit Suisse who was sentenced to 30 months in jail and returned $ 24.6 million in compensation for manipulating bond prices to hide $ 1 billion of losses. No individuals in the United Kingdom were convicted as a result of the crisis. Goldman Sachs paid $ 550 million to settle fraud charges after allegedly anticipating
SECTION 50
#17328338167605928-554: The bailout to Fannie Mae and Freddie Mac exceeds $ 300 billion (c. $ 401 billion in 2023 ) (calculated by adding the fair value deficits of the entities to the direct bailout funds at the time). Economist Paul Krugman argued in January 2010 that the simultaneous growth of the residential and commercial real estate pricing bubbles and the global nature of the crisis undermines the case made by those who argue that Fannie Mae, Freddie Mac, CRA, or predatory lending were primary causes of
6042-527: The bailouts, such as in the case of the AIG bonus payments controversy , leading to the development of a variety of "decision making frameworks", to help balance competing policy interests during times of financial crisis. Alistair Darling , the U.K.'s Chancellor of the Exchequer at the time of the crisis, stated in 2018 that Britain came within hours of "a breakdown of law and order" the day that Royal Bank of Scotland
6156-552: The bankruptcy of New Century Financial . As demand and prices continued to fall, the contagion spread to worldwide credit markets by August, and central banks began injecting liquidity . By July 2008, Fannie Mae and Freddie Mac , companies which together owned or guaranteed half of the U.S. housing market, were on the verge of collapse; the Housing and Economic Recovery Act enabled the government to take over and cover their combined $ 1.6 trillion debt on September 7. In response to
6270-427: The base year level), while others have limitations above the base year level. Emission limits do not include emissions by international aviation and shipping. Although Belarus and Turkey are listed in the convention's Annex I, they do not have emissions targets as they were not Annex I Parties when the Protocol was adopted. Kazakhstan does not have a target, but has declared that it wishes to become an Annex I Party to
6384-726: The brink, consumers and businesses would be facing a much harder time getting credit right now even if the financial system were rock solid. The problem with the economy is the loss of close to $ 6 trillion in housing wealth and an even larger amount of stock wealth. ... the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity
6498-690: The bubble burst, Australian economist John Quiggin wrote, "And, unlike the Great Depression, this crisis was entirely the product of financial markets. There was nothing like the postwar turmoil of the 1920s, the struggles over gold convertibility and reparations, or the Smoot-Hawley tariff , all of which have shared the blame for the Great Depression." Instead, Quiggin lays the blame for the 2008 near-meltdown on financial markets, on political decisions to lightly regulate them, and on rating agencies which had self-interested incentives to give good ratings. Lower interest rates encouraged borrowing. From 2000 to 2003,
6612-503: The climate, and indeed the Intergovernmental Panel on Climate Change 's Special Report on Land use, land-use change, and forestry estimates that since 1750 a third of global warming has been caused by land use change. Particular criteria apply to the definition of forestry under the Kyoto Protocol. Forest management , cropland management, grazing land management, and revegetation are all eligible LULUCF activities under
6726-496: The committee members refused to accept the report and instead rebuked OFHEO for their attempt at regulation. Some, such as Wallison, believe this was an early warning to the systemic risk that the growing market in subprime mortgages posed to the U.S. financial system that went unheeded. A 2000 United States Department of the Treasury study of lending trends for 305 cities from 1993 to 1998 showed that $ 467 billion of mortgage lending
6840-488: The convention (the non-Annex I Parties) are mostly low-income developing countries, and may participate in the Kyoto Protocol through the Clean Development Mechanism (explained below). The emissions limitations of Annex I Parties varies between different Parties. Some Parties have emissions limitations reduce below the base year level, some have limitations at the base year level (no permitted increase above
6954-1123: The convention. Australia – 108% (2.1% of 1990 emissions) Austria – 87% Belarus – 95% (subject to acceptance by other parties) Belgium – 92.5% Bulgaria – 92% (0.6%) Canada – 94% (3.33%) (withdrew) Croatia – 95% () Czech Republic – 92% (1.24%) Denmark – 79% Estonia – 92% (0.28%) Finland – 100% France – 100% Germany – 79% Greece – 125% Hungary – 94% (0.52%) Iceland – 110% (0.02%) Ireland – 113% Italy – 93.5% Japan – 94% (8.55%) Latvia – 92% (0.17%) Liechtenstein – 92% (0.0015%) Lithuania – 92% Luxembourg – 72% Netherlands – 94% New Zealand – 100% (0.19%) Norway – 101% (0.26%) Poland – 94% (3.02%) Portugal – 92% Romania – 92% (1.24%) Russian Federation – 100% (17.4%) Slovakia – 92% (0.42%) Slovenia – 92% Spain – 115% Sweden – 104% Switzerland – 92% (0.32%) Ukraine – 100% United Kingdom – 87.5% United States of America – 93% (36.1%) (non-party) Financial crisis of 2007%E2%80%9308 The 2007–2008 financial crisis , or
SECTION 60
#17328338167607068-403: The crisis and selling toxic investments to its clients. With fewer resources to risk in creative destruction, the number of patent applications was flat, compared to exponential increases in patent application in prior years. Typical American families did not fare well, nor did the "wealthy-but-not-wealthiest" families just beneath the pyramid's top. However, half of the poorest families in
7182-446: The crisis in commercial real estate and related lending took place after the crisis in residential real estate. Business journalist Kimberly Amadeo reported: "The first signs of decline in residential real estate occurred in 2006. Three years later, commercial real estate started feeling the effects." Denice A. Gierach, a real estate attorney and CPA, wrote: ... most of the commercial real estate loans were good loans destroyed by
7296-437: The crisis was not only confined to the Federal Reserve 's provision of aid to individual financial institutions. The Federal Reserve has also conducted a number of innovative lending programs with the goal of improving liquidity and strengthening different financial institutions and markets, such as Freddie Mac and Fannie Mae . In this case, the major problem among the market is the lack of free cash reserves and flows to secure
7410-513: The crisis. As part of national fiscal policy response to the Great Recession , governments and central banks, including the Federal Reserve , the European Central Bank and the Bank of England , provided then-unprecedented trillions of dollars in bailouts and stimulus , including expansive fiscal policy and monetary policy to offset the decline in consumption and lending capacity, avoid
7524-509: The crisis. In other words, bubbles in both markets developed even though only the residential market was affected by these potential causes. Countering Krugman, Wallison wrote: "It is not true that every bubble—even a large bubble—has the potential to cause a financial crisis when it deflates." Wallison notes that other developed countries had "large bubbles during the 1997–2007 period" but "the losses associated with mortgage delinquencies and defaults when these bubbles deflated were far lower than
7638-761: The critical thresholds of 1.5 °C or "well below" 2 °C, with oversupply leading to low prices of allowances with almost no effect on fossil fuel combustion. Emission trade allowances currently cover a wide price range from €7 per tonne of CO 2 in China's national carbon trading scheme to €63 per tonne of CO 2 in the EU-ETS (as of September 2021). The design of the European Union Emissions Trading Scheme (EU ETS) implicitly allows for trade of national Kyoto obligations to occur between participating countries. The Carbon Trust found that other than
7752-525: The current levels of greenhouse gases in the atmosphere. The Protocol's first commitment period started in 2008 and ended in 2012. All 36 countries that fully participated in the first commitment period complied with the Protocol. However, nine countries had to resort to the flexibility mechanisms by funding emission reductions in other countries because their national emissions were slightly greater than their targets. The financial crisis of 2007–08 reduced emissions. The greatest emission reductions were seen in
7866-523: The end of the first Kyoto commitment period, the CDM is expected to produce some 1.5 billion tons of carbon dioxide equivalent (CO 2 e) in emission reductions. Most of these reductions are through renewable energy commercialisation , energy efficiency , and fuel switching (World Bank, 2010, p. 262). By 2012, the largest potential for production of CERs are estimated in China (52% of total CERs) and India (16%). CERs produced in Latin America and
7980-414: The end of the first quarter of 2009, resulting in a decline in consumption, then a decline in business investment. In the fourth quarter of 2008, the quarter-over-quarter decline in real GDP in the U.S. was 8.4%. The U.S. unemployment rate peaked at 11.0% in October 2009, the highest rate since 1983 and roughly twice the pre-crisis rate. The average hours per work week declined to 33, the lowest level since
8094-600: The end product." Essentially, investment banks and hedge funds used financial innovation to enable large wagers to be made, far beyond the actual value of the underlying mortgage loans, using derivatives called credit default swaps, collateralized debt obligations and synthetic CDOs . By March 2011, the FDIC had paid out $ 9 billion (c. $ 12 billion in 2023 ) to cover losses on bad loans at 165 failed financial institutions. The Congressional Budget Office estimated, in June 2011, that
8208-473: The federal funds rate to drop below where it was supposed to be. However, in October 2008, the Federal Reserve was granted the power to provide banks with interest payments on their surplus reserves. This created a motivation for banks to retain their reserves instead of disbursing them, so reducing the need for the Federal Reserve to hedge its increased lending by decreases in alternative assets. Money market funds also went through runs when people lost faith in
8322-426: The financial system and got banks to start lending again, both to each other and to people. Many homeowners who were trying to keep their homes from going into default got housing credits. A package of policies was passed that let borrowers refinance their loans even though the value of their homes was less than what they still owed on their mortgages . While the causes of the bubble and subsequent crash are disputed,
8436-549: The first commitment period under the Protocol expired. The official meeting of all states party to the Kyoto Protocol is the annual Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). The first conference was held in 1995 in Berlin ( COP 1 ). The first Meeting of Parties of the Kyoto Protocol (CMP) was held in 2005 in conjunction with COP 11 . The main goal of
8550-691: The first period Kyoto commitments may affect what future atmospheric stabilization level can be achieved. Some of the principal concepts of the Kyoto Protocol are: The Protocol defines three " flexibility mechanisms " that can be used by Annex I Parties in meeting their emission limitation commitments. The flexibility mechanisms are International Emissions Trading (IET), the Clean Development Mechanism (CDM), and Joint Implementation (JI). IET allows Annex I Parties to "trade" their emissions ( Assigned Amount Units , AAUs, or "allowances" for short). The economic basis for providing this flexibility
8664-494: The former Eastern Bloc countries because the dissolution of the Soviet Union reduced their emissions in the early 1990s. Even though the 36 developed countries reduced their emissions, the global emissions increased by 32% from 1990 to 2010. A second commitment period was agreed to in 2012 to extend the agreement to 2020, known as the Doha Amendment to the Kyoto Protocol, in which 37 countries had binding targets: Australia ,
8778-457: The government began collecting the data in 1964. The economic crisis started in the U.S. but spread to the rest of the world. U.S. consumption accounted for more than a third of the growth in global consumption between 2000 and 2007 and the rest of the world depended on the U.S. consumer as a source of demand. Toxic securities were owned by corporate and institutional investors globally. Derivatives such as credit default swaps also increased
8892-595: The government seized Washington Mutual (the largest savings and loan firm ). On October 3, Congress passed the $ 800 billion Emergency Economic Stabilization Act , which authorized the Treasury Department to purchase troubled assets and bank stocks. The Fed began a program of quantitative easing by buying treasury bonds and other assets, such as MBS, and the February 2009 American Recovery and Reinvestment Act , signed by newly elected President Barack Obama , included
9006-506: The governments of European nations and the United States guaranteed the debt issued by their banks and raised the capital of their national banking systems, ultimately purchasing $ 1.5 trillion newly issued preferred stock in major banks. The Federal Reserve created then-significant amounts of new currency as a method to combat the liquidity trap . Bailouts came in the form of trillions of dollars of loans, asset purchases, guarantees, and direct spending. Significant controversy accompanied
9120-501: The growing crisis, governments around the world deployed massive bail-outs of financial institutions and other monetary and fiscal policies to prevent a collapse of the global financial system . After the bankruptcy of Lehman Brothers , the fourth largest U.S. investment bank, on September 15, the next day the Fed bailed out the American International Group (the largest U.S. insurance company), and on September 25
9234-421: The higher payments associated with rising interest rates and began to default. During 2007, lenders began foreclosure proceedings on nearly 1.3 million properties, a 79% increase over 2006. This increased to 2.3 million in 2008, an 81% increase vs. 2007. By August 2008, approximately 9% of all U.S. mortgages outstanding were either delinquent or in foreclosure. By September 2009, this had risen to 14.4%. After
9348-474: The industrial gases, chlorofluorocarbons , or CFCs, which are dealt with under the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer . Under the Protocol, only the Annex I Parties have committed themselves to national or joint reduction targets (formally called "quantified emission limitation and reduction objectives" (QELRO) – Article 4.1). Parties to the Kyoto Protocol not listed in Annex I of
9462-578: The linkage between large financial institutions. The de-leveraging of financial institutions, as assets were sold to pay back obligations that could not be refinanced in frozen credit markets, further accelerated the solvency crisis and caused a decrease in international trade. Reductions in the growth rates of developing countries were due to falls in trade, commodity prices, investment and remittances sent from migrant workers (example: Armenia ). States with fragile political systems feared that investors from Western states would withdraw their money because of
9576-489: The loans. The Federal Reserve took a number of steps to deal with worries about liquidity in the financial markets. One of these steps was a credit line for major traders, who act as the Fed's partners in open market activities. Also, loan programs were set up to make the money market mutual funds and commercial paper market more flexible. Also, the Term Asset-Backed Securities Loan Facility (TALF)
9690-428: The losses suffered in the United States when the 1997–2007 [bubble] deflated." According to Wallison, the reason the U.S. residential housing bubble (as opposed to other types of bubbles) led to financial crisis was that it was supported by a huge number of substandard loans—generally with low or no downpayments. Krugman's contention (that the growth of a commercial real estate bubble indicates that U.S. housing policy
9804-626: The majority report of the Financial Crisis Inquiry Commission, conservative American Enterprise Institute fellow Peter J. Wallison stated his belief that the roots of the financial crisis can be traced directly and primarily to affordable housing policies initiated by the United States Department of Housing and Urban Development (HUD) in the 1990s and to massive risky loan purchases by government-sponsored entities Fannie Mae and Freddie Mac. Based upon information in
9918-590: The market. To keep it from getting worse, the Fed said it would give money to mutual fund companies. Also, Department of Treasury said that it would briefly cover the assets of the fund. Both of these things helped get the fund market back to normal, which helped the commercial paper market, which most businesses use to run. The FDIC also did a number of things, like raise the insurance cap from $ 100,000 to $ 250,000, to boost customer trust. They engaged in Quantitative Easing , which added more than $ 4 trillion to
10032-443: The objective of stabilizing atmospheric concentrations . Carbon dioxide (CO 2 ) is the most important anthropogenic GHG. Stabilizing the concentration of CO 2 in the atmosphere would ultimately require the effective elimination of anthropogenic CO 2 emissions. To achieve stabilization, global GHG emissions must peak, then decline. The lower the desired stabilization level, the sooner this peak and decline must occur. For
10146-573: The precipitating factor for the Financial Crisis of 2007–2008 was the bursting of the United States housing bubble and the subsequent subprime mortgage crisis , which occurred due to a high default rate and resulting foreclosures of mortgage loans , particularly adjustable-rate mortgages . Some or all of the following factors contributed to the crisis: The relaxing of credit lending standards by investment banks and commercial banks allowed for
10260-501: The price appreciation. In a Peabody Award -winning program, NPR correspondents argued that a "Giant Pool of Money" (represented by $ 70 trillion in worldwide fixed income investments) sought higher yields than those offered by U.S. Treasury bonds early in the decade. This pool of money had roughly doubled in size from 2000 to 2007, yet the supply of relatively safe, income generating investments had not grown as fast. Investment banks on Wall Street answered this demand with products such as
10374-528: The projects either acquiring the greenhouse gases emission reductions (hard greening) or building up the necessary framework for this process (soft greening). Latvia was one of the front-runners of GISs. World Bank (2011) reported that Latvia has stopped offering AAU sales because of low AAU prices. In 2010, Estonia was the preferred source for AAU buyers, followed by the Czech Republic and Poland. Japan's national policy to meet their Kyoto target includes
10488-451: The promotion of thousands of small mortgage brokers, and by their close relationship to subprime loan aggregators such as Countrywide . Depending on how "subprime" mortgages are defined, they remained below 10% of all mortgage originations until 2004, when they rose to nearly 20% and remained there through the 2005–2006 peak of the United States housing bubble . The majority report of the Financial Crisis Inquiry Commission , written by
10602-676: The protocol, effective December 2012) to the Protocol in 2020. The Kyoto Protocol implemented the objective of the UNFCCC to reduce the onset of global warming by reducing greenhouse gas concentrations in the atmosphere to "a level that would prevent dangerous anthropogenic interference with the climate system" (Article 2). The Kyoto Protocol applied to the seven greenhouse gases listed in Annex A: carbon dioxide (CO 2 ) , methane (CH 4 ) , nitrous oxide (N 2 O) , hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF 6 ) , nitrogen trifluoride (NF 3 ) . Nitrogen trifluoride
10716-585: The purchase of AAUs sold under GISs. In 2010, Japan and Japanese firms were the main buyers of AAUs. In terms of the international carbon market, trade in AAUs are a small proportion of overall market value. In 2010, 97% of trade in the international carbon market was driven by the European Union Emission Trading Scheme (EU ETS). Between 2001, which was the first year Clean Development Mechanism (CDM) projects could be registered, and 2012,
10830-400: The pyramid suffered a decrease. The following is a timeline of the major events of the financial crisis, including government responses, and the subsequent economic recovery. There is a really good reason for tighter credit. Tens of millions of homeowners who had substantial equity in their homes two years ago have little or nothing today. Businesses are facing the worst downturn since
10944-416: The relatively conservative government-sponsored enterprises (GSEs) policed mortgage originators and maintained relatively high underwriting standards prior to 2003. However, as market power shifted from securitizers to originators, and as intense competition from private securitizers undermined GSE power, mortgage standards declined and risky loans proliferated. The riskiest loans were originated in 2004–2007,
11058-418: The second commitment period. Other developed countries without second-round targets were Canada (which withdrew from the Kyoto Protocol in 2012) and the United States (which did not ratify). If they were to remain as a part of the protocol, Canada would be hit with a $ 14 billion fine, which would be devastating to their economy, hence the reluctant decision to exit. As of October 2020, 147 states had accepted
11172-527: The section below on the Green Investment Scheme ). The "Green Investment Scheme" (GIS) is a plan for achieving environmental benefits from trading surplus allowances (AAUs) under the Kyoto Protocol. The Green Investment Scheme (GIS), a mechanism in the framework of International Emissions Trading (IET), is designed to achieve greater flexibility in reaching the targets of the Kyoto Protocol while preserving environmental integrity of IET. However, using
11286-610: The six Democratic appointees, the minority report, written by three of the four Republican appointees, studies by Federal Reserve economists, and the work of several independent scholars generally contend that government affordable housing policy was not the primary cause of the financial crisis. Although they concede that governmental policies had some role in causing the crisis, they contend that GSE loans performed better than loans securitized by private investment banks, and performed better than some loans originated by institutions that held loans in their own portfolios. In his dissent to
11400-464: The supply of mortgages originated at traditional lending standards had been exhausted, and continued strong demand began to drive down lending standards. The collateralized debt obligation in particular enabled financial institutions to obtain investor funds to finance subprime and other lending, extending or increasing the housing bubble and generating large fees. This essentially places cash payments from multiple mortgages or other debt obligations into
11514-580: The trading that occurs as part of the EU ETS, no intergovernmental emissions trading had taken place. One of the environmental problems with IET is the large surplus of allowances that are available. Russia, Ukraine, and the new EU-12 member states (the Kyoto Parties Annex I Economies-in-Transition, abbreviated "EIT": Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Slovakia, Slovenia, and Ukraine) have
11628-559: The treaty was brought into force, effective 16 February 2005. As of October 2020, 147 states have accepted the Doha amendment. It will enter into force as of 31 December 2020. As of 2022 there are four UN member states or observers which are not party to the protocol, all of which are members of the UNFCCC : Andorra, Holy See, Palestine, South Sudan. Kyoto Protocol The Kyoto Protocol ( Japanese : 京都議定書 , Hepburn : Kyōto Giteisho )
11742-407: The treaty. For Annex I parties (e.g. a developed state or one with an 'economy in transition') this means that it has agreed to cap emissions in accordance with the Protocol. Iceland was the 55th state to ratify, fulfilling the first condition for coming-into-force. With Russia's ratification the "55 percent of 1990 carbon dioxide emissions of the Parties included in Annex I" clause was satisfied and
11856-594: The use of the flexibility mechanisms. The CDM and JI are called "project-based mechanisms", in that they generate emission reductions from projects. The difference between IET and the project-based mechanisms is that IET is based on the setting of a quantitative restriction of emissions, while the CDM and JI are based on the idea of "production" of emission reductions. The CDM is designed to encourage production of emission reductions in non-Annex I Parties, while JI encourages production of emission reductions in Annex I Parties. The production of emission reductions generated by
11970-617: The years between 1994 and 2007. They also argue that the Federal Reserve's classification of CRA loans as "prime" is based on the faulty and self-serving assumption that high-interest-rate loans (3 percentage points over average) equal "subprime" loans. Others have pointed out that there were not enough of these loans made to cause a crisis of this magnitude. In an article in Portfolio magazine, Michael Lewis spoke with one trader who noted that "There weren't enough Americans with [bad] credit taking out [bad loans] to satisfy investors' appetite for
12084-464: The years of the most intense competition between securitizers and the lowest market share for the GSEs. The GSEs eventually relaxed their standards to try to catch up with the private banks. A contrarian view is that Fannie Mae and Freddie Mac led the way to relaxed underwriting standards, starting in 1995, by advocating the use of easy-to-qualify automated underwriting and appraisal systems, by designing no-down-payment products issued by lenders, by
12198-483: Was added for the second compliance period during the Doha Round. The Protocol was based on the principle of common but differentiated responsibilities: it acknowledged that individual countries have different capabilities in combating climate change, owing to economic development , and therefore placed the obligation to reduce current emissions on developed countries on the basis that they are historically responsible for
12312-524: Was among the five worst financial crises the world had experienced and led to a loss of more than $ 2 trillion from the global economy. U.S. home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $ 10.5 (~$ 14.6 trillion in 2023) trillion. The increase in cash out refinancings , as home values rose, fueled an increase in consumption that could no longer be sustained when home prices declined. Many financial institutions owned investments whose value
12426-518: Was an international treaty which extended the 1992 United Nations Framework Convention on Climate Change (UNFCCC) that commits state parties to reduce greenhouse gas emissions , based on the scientific consensus that global warming is occurring and that human-made CO 2 emissions are driving it. The Kyoto Protocol was adopted in Kyoto , Japan, on 11 December 1997 and entered into force on 16 February 2005. There were 192 parties ( Canada withdrew from
12540-450: Was bailed-out. Instead of financing more domestic loans, some banks instead spent some of the stimulus money in more profitable areas such as investing in emerging markets and foreign currencies. In July 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act was enacted in the United States to "promote the financial stability of the United States". The Basel III capital and liquidity standards were adopted worldwide. Since
12654-542: Was based on home mortgages such as mortgage-backed securities , or credit derivatives used to insure them against failure, which declined in value significantly. The International Monetary Fund estimated that large U.S. and European banks lost more than $ 1 trillion on toxic assets and from bad loans from January 2007 to September 2009. Lack of investor confidence in bank solvency and declines in credit availability led to plummeting stock and commodity prices in late 2008 and early 2009. The crisis rapidly spread into
12768-550: Was made by Community Reinvestment Act (CRA)-covered lenders into low and mid-level income (LMI) borrowers and neighborhoods, representing 10% of all U.S. mortgage lending during the period. The majority of these were prime loans. Sub-prime loans made by CRA-covered institutions constituted a 3% market share of LMI loans in 1998, but in the run-up to the crisis, fully 25% of all subprime lending occurred at CRA-covered institutions and another 25% of subprime loans had some connection with CRA. However, most sub-prime loans were not made to
12882-508: Was not the cause of the crisis) is challenged by additional analysis. After researching the default of commercial loans during the financial crisis, Xudong An and Anthony B. Sanders reported (in December 2010): "We find limited evidence that substantial deterioration in CMBS [commercial mortgage-backed securities] loan underwriting occurred prior to the crisis." Other analysts support the contention that
12996-515: Was put in place thanks to a joint effort with the US Department of the Treasury. This plan was meant to make it easier for consumers and businesses to get credit by giving Americans who owned high-quality asset-backed securities more credit. Before the crisis, the Federal Reserve's stocks of Treasury securities were sold to pay for the increase in credit. This method was meant to keep banks from trying to give out their extra savings, which could cause
#759240