The carbon market in 2020: volumes, prices and gains from trade
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 ï¿½investor perspectiveï¿½. 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 ï¿½ substantial, but well short of the mitigation effort required for a 450ppm CO2e pathway. The global carbon price would vary from ï¿½30 per tCO2 in Europe to ï¿½15 per tCO2 on the international offset market and in the new US emissions trading scheme currently under discussion.
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