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Designing carbon markets. Part I: Carbon markets in time

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  • Fankhauser, Samuel
  • Hepburn, Cameron

Abstract

This paper analyses the design of carbon markets in time (i.e., intertemporally). It is part of a twin set of papers that ask, starting from first principles, what an optimal global carbon market would look like by around 2030. Our focus is on firm-level cap-and-trade systems, although much of what we say would also apply to government-level trading and carbon offset schemes. We examine the "first principles" of temporal design that would help to maximise flexibility and to minimise costs, including banking and borrowing and other mechanisms to provide greater carbon price predictability and credibility over time.

Suggested Citation

  • Fankhauser, Samuel & Hepburn, Cameron, 2010. "Designing carbon markets. Part I: Carbon markets in time," Energy Policy, Elsevier, vol. 38(8), pages 4363-4370, August.
  • Handle: RePEc:eee:enepol:v:38:y:2010:i:8:p:4363-4370
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    Citations

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    Cited by:

    1. Samuel Fankhauser & Cameron Hepburn & Jisung Park, 2010. "Combining Multiple Climate Policy Instruments: How Not To Do It," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., pages 209-225.
    2. repec:eee:ecomod:v:364:y:2017:i:c:p:98-112 is not listed on IDEAS
    3. Holt, Charles A. & Shobe, William M., 2016. "Reprint of: Price and quantity collars for stabilizing emission allowance prices: Laboratory experiments on the EU ETS market stability reserve," Journal of Environmental Economics and Management, Elsevier, vol. 80(C), pages 69-86.
    4. Richstein, Jörn C. & Chappin, Emile J.L. & de Vries, Laurens J., 2014. "Cross-border electricity market effects due to price caps in an emission trading system: An agent-based approach," Energy Policy, Elsevier, vol. 71(C), pages 139-158.
    5. Pearse, Rebecca, 2016. "The coal question that emissions trading has not answered," Energy Policy, Elsevier, vol. 99(C), pages 319-328.
    6. Brauneis, Alexander & Mestel, Roland & Palan, Stefan, 2013. "Inducing low-carbon investment in the electric power industry through a price floor for emissions trading," Energy Policy, Elsevier, vol. 53(C), pages 190-204.
    7. Spencer, Thomas & Marcey, Celine & Colombier, Michel & Guerin, Emmanuel, 2011. "Decarbonizing the EU power sector: policy approaches in the light of current trends and long-term trajectories," MPRA Paper 35009, University Library of Munich, Germany.
    8. Sven Rudolph & Christine Lenz & Barbara Volmert & Achim Lerch, 2011. "Towards Sustainable Carbon Markets: Requirements for Ecologically Effective, Economically Efficient, and Socially Just Emissions Trading Schemes," MAGKS Papers on Economics 201134, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    9. Sven Rudolph & Achim Lerch, 2015. "Just ETS? Social Justice and Recent Reforms in EU and US Carbon Markets," Discussion papers e-15-009, Graduate School of Economics , Kyoto University.
    10. 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.
    11. Usubiaga, Arkaitz & Acosta-Fernández, José & McDowall, Will & Li, Francis G.N., 2017. "Exploring the macro-scale CO2 mitigation potential of photovoltaics and wind energy in Europe's energy transition," Energy Policy, Elsevier, vol. 104(C), pages 203-213.
    12. Richstein, Jörn C. & Chappin, Émile J.L. & de Vries, Laurens J., 2015. "The market (in-)stability reserve for EU carbon emission trading: Why it might fail and how to improve it," Utilities Policy, Elsevier, vol. 35(C), pages 1-18.
    13. Sascha Kollenberg & Luca Taschini, 2015. "The European Union Emissions Trading System and the Market Stability Reserve: Optimal Dynamic Supply Adjustment," CESifo Working Paper Series 5380, CESifo Group Munich.
    14. David F. Perkis & Timothy N. Cason & Wallace E. Tyner, 2016. "An Experimental Investigation of Hard and Soft Price Ceilings in Emissions Permit Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(4), pages 703-718, April.
    15. Nicholas Howarth, 2011. "Clean Energy Technology and the Role of Non-Carbon Price-Based Policy: An Evolutionary Economics Perspective," European Planning Studies, Taylor & Francis Journals, vol. 20(5), pages 871-891, October.
    16. repec:spr:ieaple:v:17:y:2017:i:6:d:10.1007_s10784-017-9352-2 is not listed on IDEAS
    17. Simon Quemin & Christian de Perthuis, 2017. "Transitional restricted linkage between Emissions Trading Schemes," Working Papers 1701, Chaire Economie du climat.

    More about this item

    Keywords

    Carbon trading Banking and borrowing EU ETS;

    JEL classification:

    • N0 - Economic History - - General
    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance
    • J1 - Labor and Demographic Economics - - Demographic Economics

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