Tuesday, December 1, 2015

The Carbon Market

Maybe it is the environmental economics major in me, but today I found myself sitting in on several side events on carbon pricing, climate finance, and the overall carbon market that is being talked about in many of this year's discussions. The first side event entitled Market Mechanisms in the 2015 agreement- what might the outcome be? discussed the evolution of carbon markets around the world, where we are heading, what the UN can do, and about the agreement text. The conversation covered why increasing market size is needed suggesting as of today's emissions trading is mainly a tool for minimizing costs domestically. In addition, the delegates discussed how we live in a fragmented world with different markets that have different prices, rules, and offset protocols that vary in verifiction and tracking. One point that was mentioned that I thought was important was that the Paris agreement will address international transfers of mitigation and allow for future convergence of carbon prices, but will not create markets, nor create a global carbon price. Overall, it will create conditions for the emergence of an international market for compliance with NDCs. 

Although the optimal decision would be to move away from carbon emitting resources that produce such externaltities on the economy altogether, the realization to this culture and political shift may be far off, or still developing, at this moment and putting a price on carbon, whether a tax, cap and trade program, or introduction of a carbon budget policy is something the market- as well as the world- needs.

But if you are still unsure as to why carbon pricing is so important check out this video and news article about when President Obama was asked  today if he sees any political initiative back home (The U.S.) toward putting a price on carbon. His response brought back many memories of the lessons in my economics courses on externalities and how the market does not account for such costs and needs intervetion to correct. Here is a link to the video and press release:


  1. I agree that carbon pricing is very important, but I hope they are prepared to make sure it isn't watered down or structured to benefit the polluters, as most legislation is.
    This is all part of the mammoth problem caused by allowing industry to externalize some of their costs, thus passing huge costs on to society. [The cost to society of coal is estimated at over $210/ton, but the market price for coal is only about $50/ton!]

  2. Stephen: Thanks for your nice post. Have you been in touch with Sarabeth or other members of the Citizens' Climate Lobby delegation in Paris? When you return from Paris I hope you will work with CCL to pass carbon fee legislation.

  3. John, both Stephen and Audrey are doing an internship with Sarabeth that relates to CCL.

  4. Upon their return from Paris, I encourage Sarabeth, Stephen, and Audrey (individually, or as a group) to submit OpEds to appropriate newspapers (Morning Call & Express-Times, and maybe others), regarding the imperatives from their generation, about their experiences in Paris, and about Carbon Tax proposals (including the revenue-neutral type).