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Carbon Markets 15 Years after Kyoto: Lessons Learned, New Challenges

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  • Richard G. Newell
  • William A. Pizer
  • Daniel Raimi

Abstract

Carbon markets are substantial and they are expanding. There are many lessons from market experiences over the past eight years: there should be 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 market architecture features separate emissions trading systems serving distinct jurisdictions and a variety of other types of policies exist alongside the carbon markets.This situation is in sharp contrast to the top-down, 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. Stakeholders and policymakers must confront how to measure the comparability of efforts among markets as well as relative to a variety of other policy approaches. International negotiators must in turn work out a global agreement that can accommodate and support increasingly bottom-up approaches to carbon markets and climate change mitigation.

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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 27 (2013)
Issue (Month): 1 (Winter)
Pages: 123-46

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Handle: RePEc:aea:jecper:v:27:y:2013:i:1:p:123-46

Note: DOI: 10.1257/jep.27.1.123
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Citations

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Cited by:
  1. repec:hal:wpaper:hal-00866408 is not listed on IDEAS
  2. Matthew Ranson & Robert Stavins, 2014. "Linkage of Greenhouse Gas Emissions Trading Systems: Learning from Experience," NBER Working Papers 19824, National Bureau of Economic Research, Inc.
  3. Medina, Vicente & Pardo, Ángel & Pascual, Roberto, 2014. "The timeline of trading frictions in the European carbon market," Energy Economics, Elsevier, vol. 42(C), pages 378-394.
  4. Stephen P. Holland & Michael R. Moore, 2012. "Market Design in Cap and Trade Programs: Permit Validity and Compliance Timing," NBER Working Papers 18098, National Bureau of Economic Research, Inc.
  5. repec:hal:ciredw:hal-00866408 is not listed on IDEAS
  6. Alix-Garcia, Jennifer & Wolff, Hendrik, 2014. "Payment for Ecosystem Services from Forests," IZA Discussion Papers 8179, Institute for the Study of Labor (IZA).

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