Working Paper: NBER ID: w18504
Authors: Richard G. Newell; William A. Pizer; Daniel Raimi
Abstract: Carbon markets are substantial and they are expanding. There are many lessons from experiences over the past eight years: fewer free allowances, better management of market-sensitive information, and a recognition that trading systems require adjustments that have consequences for market participants and market confidence. Moreover, the emerging international architecture features separate emissions trading systems serving distinct jurisdictions. These programs are complemented by a variety of other types of policies alongside the carbon markets. This sits in sharp contrast to the integrated global trading architecture envisioned 15 years ago by the designers of the Kyoto Protocol and raises a suite of new questions. In this new architecture, jurisdictions with emissions trading have to decide how, whether, and when to link with one another, and policymakers overseeing carbon markets must confront how to measure the comparability of efforts among markets and relative to a variety of other policy approaches.
Keywords: carbon markets; emissions trading; climate change; policy design
JEL Codes: Q48; Q54; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| carbon market design features (D47) | greenhouse gas emissions reduction outcomes (Q54) |
| presence of a carbon price (Q52) | emissions abatement (Q52) |
| better management of market design elements (D47) | more effective emissions reductions (Q52) |
| broader economic conditions and regulatory frameworks (L59) | effectiveness of emissions trading (Q58) |
| market structure and external economic pressures (L11) | effectiveness of emissions reductions (Q52) |