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Carbon markets in space and time

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  • Sam Fankhauser
  • Cameron Hepburn

Abstract

This paper analyses the design of carbon markets in time (intertemporally) and space (geographically) from first principles, starting initially with a relatively clean slate and asking what an optimal global carbon market would look like by around 2030. Our focus is on firmlevel trading systems, although much of what we say would also apply to government-level trading (e.g., AAU trading under the Kyoto Protocol). We examine the �first principles� of design to maximise flexibility and to minimise costs, consider temporal design including banking and borrowing and other mechanisms to provide greater carbon price predictability and credibility over time, and consider spatial elements, examining the key design issues in linking national and regional carbon markets together to create a global carbon market.

Suggested Citation

  • Sam Fankhauser & Cameron Hepburn, 2009. "Carbon markets in space and time," GRI Working Papers 3, Grantham Research Institute on Climate Change and the Environment.
  • Handle: RePEc:lsg:lsgwps:wp03
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Fankhauser, Samuel & Martin, Nat, 2010. "The economics of the CDM levy: Revenue potential, tax incidence and distortionary effects," Energy Policy, Elsevier, vol. 38(1), pages 357-363, January.
    2. Fankhauser, Samuel & Martin, Nat & Prichard, Stephen, 2009. "The economics of the CDM levy: revenue potential, tax incidence and distortionary effects," LSE Research Online Documents on Economics 37604, London School of Economics and Political Science, LSE Library.
    3. Perdan, Slobodan & Azapagic, Adisa, 2011. "Carbon trading: Current schemes and future developments," Energy Policy, Elsevier, vol. 39(10), pages 6040-6054, October.
    4. Bowen, Alex & Stern, Nicholas, 2010. "Environmental policy and the economic downturn," LSE Research Online Documents on Economics 37589, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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