The carbon market in 2020: volumes, prices and gains from trade


Working Paper 11

Abstract

Carbon markets are central to the global effort to reduce greenhouse gas emissions.

We introduce a new carbon market model that aims to simulate the development of the global carbon market over the next ten to 20 years.

The model is based on detailed regional and sectoral marginal abatement cost data and takes an ‘investor perspective’: it therefore takes into account market distortions, like taxes, and accounts for imperfections in policy delivery.

We estimate that implementing all the carbon market proposals that are currently contemplated would result in global emission reductions of 7 GtCO2 by 2020. This is substantial, but well short of the mitigation effort required for a 450ppm CO2e pathway.

The global carbon price would vary from €30 per tCO2 in Europe to €15 per tCO2 on the international offset market and in the new US emissions trading scheme currently under discussion.

Marcel Brinkman, Samuel Fankhauser, Ben Irons and Stephan Weyers