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Lurking in the shadows: The impact of CO2 emissions target setting on carbon pricing in the Kyoto agreement period

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  • Quinn, Barry
  • Gallagher, Ronan
  • Kuosmanen, Timo

Abstract

This paper is a case study of the impact of CO2 emissions target setting. We empirically investigate the targets set during the Kyoto Protocol period using a convex nonparametric least squares system, quantile regressions, and a comprehensive data set of 125 countries. Our findings reveal CO2 marginal abatement costs, which: (1) are significantly higher for target setting countries; (2) increase over the sample period; (3) and are an order of magnitude greater than the prevailing emissions pricing mechanisms. The results provide insights into the consequences of policies to curb unwanted by-products in a regulated system and shed light on the price efficiency of carbon markets. Furthermore, we contribute to the debate on emission reduction standard-setting and highlight the importance of shadow price estimates when regulating market instabilities in an emission trading scheme.

Suggested Citation

  • Quinn, Barry & Gallagher, Ronan & Kuosmanen, Timo, 2023. "Lurking in the shadows: The impact of CO2 emissions target setting on carbon pricing in the Kyoto agreement period," Energy Economics, Elsevier, vol. 118(C).
    • Handle: RePEc:eee:eneeco:v:118:y:2023:i:c:s0140988322004674
    DOI: 10.1016/j.eneco.2022.106338
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