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Carbon markets in space and time

By Samuel Fankhauser and 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

Topics: GE Environmental Sciences, JZ International relations
Publisher: Centre for Climate Change Economics and Policy and Grantham Research Institute on Climate Change and the Environment
Year: 2009
OAI identifier: oai:eprints.lse.ac.uk:37606
Provided by: LSE Research Online

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