CIAO DATE: 12/2013
December 2013
Climate policymakers face major challenges when designing future global carbon markets—those involving carbon transactions between “buyers” (predominantly developed countries to date) and “sellers” (mainly developing countries, particularly least developed nations). On one hand, domestic carbon markets are currently spreading and linking rapidly around the world. By 2015, based on already announced policies, carbon markets will cover almost 3 billion people and the lion’s share of the world’s economy. Because carbon markets, and carbon pricing instruments in general, present the most flexible mechanism to create low-carbon economies, carbon markets are likely to play a major role in future efforts to confront climate change—perhaps on the order of shouldering 50 percent of the solution. Yet today’s global carbon market, on the other hand, is somewhat dysfunctional and highly volatile—characterized by dramatic changes in supply, demand, price, and public confidence. Prices today under the Clean Development Mechanism (CDM), the world’s largest global carbon market, are just 7 percent of market value in 2011, leaving policymakers, companies, and investors wondering what should be done to make the future global carbon market more viable.
Resource link: Trading Up: The Case for an International Carbon Market Reserve to Reduce Volatility at the Limits in 2020 and Beyond [PDF] - 7.6M