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The Brave New World of Carbon Trading

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  • Spash, Clive L.

Abstract

Human induced climate change has become a prominent political issue, at both national and international levels, leading to the search for regulatory ‘solutions’. Emission trading has risen in popularity to become the most broadly favoured government strategy. Carbon permits have then quickly been developed as a serious financial instrument in markets turning over billions of dollars a year. In this paper, I show how the reality of permit market operation is far removed from the assumptions of economic theory and the promise of saving resources by efficiently allocating emission reductions. The pervasiveness of Greenhouse Gas emissions, strong uncertainty and complexity combine to prevent economists from substantiating their theoretical claims of cost effectiveness. Corporate power is shown to be a major force affecting emissions market operation and design. The potential for manipulation to achieve financial gain, while showing little regard for environmental or social consequences, is evident as markets have extended internationally and via trading offsets. At the individual level, there is the potential for emissions trading to have undesirable ethical and psychological impacts and to crowd out voluntary actions. I conclude that the focus on such markets is creating a distraction from the need for changing human behaviour, institutions and infrastructure.

Suggested Citation

  • Spash, Clive L., 2009. "The Brave New World of Carbon Trading," MPRA Paper 19114, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:19114
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    File URL: https://mpra.ub.uni-muenchen.de/19114/1/MPRA_paper_19114.pdf
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. If not an Emissions Trading Scheme, then what?
      by Peter Earl in Peter E. Earl - Eclectic Real-World Economics on 2010-04-29 09:15:53
    2. Key environment policy still unknown in the NSW election
      by Neil Perry, Research Lecturer at University of Western Sydney in The Conversation on 2015-03-23 07:34:02

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    Cited by:

    1. Spash, Clive L. & Lo, Alex Y., 2011. "Australia's Carbon Tax: A Sheep in Wolf's Clothing?," MPRA Paper 33997, University Library of Munich, Germany.
    2. Clive L. Spash, 2015. "The Future Post-Growth Society," Development and Change, International Institute of Social Studies, vol. 46(2), pages 366-380, March.
    3. Spash, Clive L., 2013. "The shallow or the deep ecological economics movement?," Ecological Economics, Elsevier, vol. 93(C), pages 351-362.
    4. Svetlana Maslyuk & Dinusha Dharmaratna, 2011. "Comparative analysis of the existing and proposed ETS," Monash Economics Working Papers 15-11, Monash University, Department of Economics.
    5. Sven Rudolph & Elena Aydos & Takeshi Kawakatsu & Achim Lerch, 2017. "There Did All the Markets Go!Or: Sustainable Carbon Markets and How to Get There," Discussion papers e-17-001, Graduate School of Economics , Kyoto University.

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    More about this item

    Keywords

    Emissions trading; Climate change;

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • 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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