Designing a U.S. Market for CO2
Name
MITJPSPGC_Rpt171.pdf
Size
264.39 KB
Format
Adobe PDF
Checksum (MD5)
ed0c65a6c0c484b4121816e5c1ee1ce8
Author(s)
Parsons, John E.
Ellerman, A. Denny
Feilhauer, Stephan M. (Stephan Marvin)
Date Issued
February 2009
Publisher
MIT Joint Program on the Science and Policy of Global Change
Citation
Report no. 171
Series/Report no.
;Report no. 171
Abstract
In this paper we focus on one component of the cap-and-trade system: the markets that arise for trading allowances after they have been allocated or auctioned. The efficient functioning of the market is key to the success of cap-and-trade as a system. We review the performance of the EU CO2 market and the U.S. SO2 market and examine how the flexibility afforded by banking and borrowing, and the limitations on banking and borrowing, have impacted the evolution of price in both markets. While both markets have generally functioned well, certain episodes illustrate the importance of designing the rules to encourage liquidity in the market.
Description
Abstract and PDF report are also available on the MIT Joint Program on the Science and Policy of Global Change website (http://globalchange.mit.edu/).
