A data analytics based approach for modeling the effects of a carbon market on the sustainable control of CO2 emissions in Latin America

Abstract

Sustainability defines itself with preserving the natural resources, while maintaining a sustained rate of economic growth. Latin American countries are rich in natural resources and this has created an opportunity in exploiting the resources in order to gain economic advances. In particular, the newly rising economic powers in the region are attracting international investments in their oil exploration and production industries. Brazil, Venezuela and Columbia in South and Mexico in North America are among the largest Latin American oil producers of the world. On the other hand, the increasingly concerning effects of the climate change phenomena has drawn significant attention towards methods of controlling the roots of the problem. An important cause as confirmed by the historic emissions data is the man-made Greenhouse Gas emissions resulting from excessive use of fossil fuels, and more importantly the carbon-intensive coal and oil. In this paper, we investigate the possible impacts of an emission control system on Latin American oil producers to control the rate of emissions through a financial market which is referred to as the carbon market. Variations of this system has successfully been implemented in the Europe and some states of the US, such as the state of California. Our approach is based on the system dynamics methodology where the main factors of a complex system are extracted and their causal relations are exploited to obtain mathematical models that can explain the behaviors of overall system. The general tools provided by the system dynamics approach for policy testing makes it very appealing for our purpose which is to test the effect of a carbon market on the Latin American producers. We extend our previous models to fit the Latin American economies focusing on the sustainability issues.