What You Should Know to Trade in CO2 Markets
Energies, Vol. 1, pp. 120-153, 2008
54 Pages Posted: 8 Jul 2008 Last revised: 23 Dec 2008
Date Written: March 1, 2008
Abstract
Since the ratification of the Kyoto Protocol by a large number of countries, carbon trading has been expanding continuously. The objective of this chapter is to study the trading of Kyoto credits. We begin with the origins of carbon trading in order to understand how carbon trading works in Europe and specifically the functioning of the European Union Emission Trading Scheme (EU ETS). This scheme has facilitated the creation of several spot, futures and options markets where it is possible to trade European Union Allowances (EUAs). The different types of contracts that permit the trading of EUAs are analysed in detail. Additionally, as one of the objectives of the third flexibility mechanism of the Kyoto Protocol (emissions trading) is the creation of a global carbon market, the possibilities of linking the EU ETS with the other United Nations carbon markets are also studied. Finally, the trading of the units generated by the Joint Implementation and the Clean Development Mechanism is also explored. The main conclusion of the chapter is that the EU ETS has succeeded in imposing a price on carbon emissions, which was one of its most important objectives.
Keywords: Emission Trading, EU ETS, Carbon Markets
JEL Classification: G13, G14
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Benefits and Costs of Transparency: A Model of Disclosure Based Regulation
By David Weil
-
Climate Change and Insurance: Integrative Principles and Regulatory Risks
-
Responding to Threats of Climate Change Mega-Catastrophes
By Carolyn Kousky, Olga Rostapshova, ...
-
Responding to Threats of Climate Change Mega-Catastrophes
By Carolyn Kousky, Olga Rostapshova, ...
-
Interdependency of Science and Risk Finance in Catastrophe Insurance and Climate Change
-
Portfolio Risk Management and Carbon Emissions Valuation in Electric Power
By Paul R. Kleindorfer and Lide Li