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The carbon market in 2020: volumes, prices and gains from trade

Author

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  • Brinkman, Marcel
  • Fankhauser, Samuel
  • Irons, Ben
  • Weyers, Stephan

Abstract

Carbon markets are central to the global effort to reduce greenhouse gas emissions. This paper introduces a new carbon market model that aims to simulate the development of the global carbon market over the next 10-20 years. The model is based on detailed regional and sectoral marginal abatement cost data and takes an “investor perspective”. That is, it takes into account market distortions like taxes and accounts for imperfections in policy delivery. We estimate that implementing all the carbon market proposals that are currently contemplated would result in global emission reductions of 7 GtCO2 by 2020 – substantial, but well short of the mitigation effort required for a 450ppm CO2e pathway. The global carbon price would vary from €30 per tCO2 in Europe to €15 per tCO2 on the international offset market and in the new US emissions trading scheme currently under discussion.

Suggested Citation

  • Brinkman, Marcel & Fankhauser, Samuel & Irons, Ben & Weyers, Stephan, 2009. "The carbon market in 2020: volumes, prices and gains from trade," LSE Research Online Documents on Economics 37614, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:37614
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    File URL: https://researchonline.lse.ac.uk/id/eprint/37614/
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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • 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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