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Carbon Markets: Past, Present, and Future

Author

Listed:
  • Richard G. Newell

    (Nicholas School of the Environment, Duke University, Durham, North Carolina 27708
    Duke University Energy Initiative, Duke University, Durham, North Carolina 27708
    National Bureau of Economic Research, Cambridge, Massachusetts 02138)

  • William A. Pizer

    (National Bureau of Economic Research, Cambridge, Massachusetts 02138
    Sanford School of Public Policy and Nicholas Institute for Environmental Policy Solutions, Duke University, Durham, North Carolina 27708
    Resources for the Future, Washington, DC 20036
    Center for Global Development, Washington, DC 20036)

  • Daniel Raimi

    (Duke University Energy Initiative, Duke University, Durham, North Carolina 27708)

Abstract

Carbon markets are substantial and expanding. There are many lessons from experience over the past 9 years: fewer free allowances, careful moderation of low and high prices, 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 architecture 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 policy makers must confront how to measure both the comparability of efforts among markets and the comparability between markets and a variety of other policy approaches.

Suggested Citation

  • Richard G. Newell & William A. Pizer & Daniel Raimi, 2014. "Carbon Markets: Past, Present, and Future," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 191-215, October.
    • Handle: RePEc:anr:reseco:v:6:y:2014:p:191-215
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    Cited by:

    1. Yu, Song-min & Fan, Ying & Zhu, Lei & Eichhammer, Wolfgang, 2020. "Modeling the emission trading scheme from an agent-based perspective: System dynamics emerging from firms’ coordination among abatement options," European Journal of Operational Research, Elsevier, vol. 286(3), pages 1113-1128.
    2. Liu, Songyuan & Zhou, Peng & Wang, Mei & Xu, Aobo, 2025. "An agent-based approach to modeling power firms' emission reduction strategies and market dynamics," Applied Energy, Elsevier, vol. 400(C).
    3. van der Hoff, Richard & Rajão, Raoni & Leroy, Pieter, 2019. "Can REDD+ still become a market? Ruptured dependencies and market logics for emission reductions in Brazil," Ecological Economics, Elsevier, vol. 161(C), pages 121-129.
    4. James B. Bushnell & Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel, 2017. "Strategic Policy Choice in State-Level Regulation: The EPA's Clean Power Plan," American Economic Journal: Economic Policy, American Economic Association, vol. 9(2), pages 57-90, May.
    5. Burtraw, Dallas & Palmer, Karen & Munnings, Clayton & Weber, Paige & Woerman, Matt, 2013. "Linking by Degrees: Incremental Alignment of Cap-and-Trade Markets," RFF Working Paper Series dp-13-04, Resources for the Future.
    6. Arsalan Haneef Malik & Mohamad bin Jais & Shafinah Rahim & Awais Ur Rehman & Shahzeb Khalid, 2023. "Significance of environmental sustainability to maintain financial stability: mediating roles of financial inclusion," Asia-Pacific Journal of Regional Science, Springer, vol. 7(4), pages 1307-1328, December.
    7. Adbi, Arzi & Agarwal, Sumit & Natarajan, Siddharth, 2025. "Global heterogeneity in ETS rollouts and subsequent decarbonization outcomes," Energy Economics, Elsevier, vol. 151(C).
    8. Qi, Shaozhou & Wang, Banban & Zhang, Jihong, 2014. "Policy design of the Hubei ETS pilot in China," Energy Policy, Elsevier, vol. 75(C), pages 31-38.
    9. Wang, Mei & Liu, Songyuan & Liu, Jiageng & Li, Zhengjun, 2025. "Agent-based modeling of firm's heterogeneous preferences: Implications for trading and technology adoption in electricity-carbon markets," Energy Economics, Elsevier, vol. 148(C).
    10. Arif, Faisal & Dissou, Yazid, 2016. "Regional burden sharing of GHG mitigation policies in a decentralized federation," Economic Modelling, Elsevier, vol. 52(PB), pages 390-399.
    11. repec:ags:aes324:345994 is not listed on IDEAS
    12. Koch, Nicolas & Fuss, Sabine & Grosjean, Godefroy & Edenhofer, Ottmar, 2014. "Causes of the EU ETS price drop: Recession, CDM, renewable policies or a bit of everything?—New evidence," Energy Policy, Elsevier, vol. 73(C), pages 676-685.
    13. Sheng, Jichuan, 2020. "Private sector participation and incentive coordination of actors in REDD+," Forest Policy and Economics, Elsevier, vol. 118(C).
    14. Grebel, Thomas & Islam, Rohidul, 2022. "Endogenous cap reduction in Emission Trading Systems," Ilmenau Economics Discussion Papers 169, Ilmenau University of Technology, Institute of Economics.
    15. Xiang-Yu Wang & Bao-Jun Tang, 2018. "Review of comparative studies on market mechanisms for carbon emission reduction: a bibliometric analysis," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 94(3), pages 1141-1162, December.
    16. Kate O’Neill & Erika Weinthal & Patrick Hunnicutt, 2017. "Seeing complexity: visualization tools in global environmental politics and governance," Journal of Environmental Studies and Sciences, Springer;Association of Environmental Studies and Sciences, vol. 7(4), pages 490-506, December.
    17. Hall, Peggy Kirk, 2022. "Carbon For Sale: Legal Issues With Carbon Farming In The United States," 23rd Congress, Copenhagen, Denmark, 2022 345994, International Farm Management Association.
    18. Yang Liu & Xueqing Yang & Mei Wang, 2021. "Global Transmission of Returns among Financial, Traditional Energy, Renewable Energy and Carbon Markets: New Evidence," Energies, MDPI, vol. 14(21), pages 1-32, November.
    19. Koch, Nicolas & Grosjean, Godefroy & Fuss, Sabine & Edenhofer, Ottmar, 2016. "Politics matters: Regulatory events as catalysts for price formation under cap-and-trade," Journal of Environmental Economics and Management, Elsevier, vol. 78(C), pages 121-139.
    20. Bello, Carolina & Culot, Laurence & Ruiz Agudelo, Cesar Augusto & Galetti, Mauro, 2021. "Valuing the economic impacts of seed dispersal loss on voluntary carbon markets," Ecosystem Services, Elsevier, vol. 52(C).
    21. Yeo, Boon-Ling & Anastasiadis, Simon & Kerr, Suzi & Browne, Oliver, 2012. "Synergies between Nutrient Trading Scheme and the New Zealand Greenhouse Gas (GHG) Emissions Trading Scheme (ETS) in the Lake Rotorua Catchment," 2012 Conference, August 31, 2012, Nelson, New Zealand 144270, New Zealand Agricultural and Resource Economics Society.

    More about this item

    Keywords

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    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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