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Frontiers of research on carbon markets: theory and evidence for policy

June 25, 2018

Over the last decade the use of markets to reduce greenhouse gas emissions has come of age. Carbon markets are now in operation, in the pipeline or under consideration in a multitude of regional, national and sub-national jurisdictions around the world. With the recent announcement of a Chinese national emissions trading system, markets will soon cover well over 20% of global CO2 emissions. This share is expected to increase further as countries start implementing their commitments under the Paris Agreement. When markets for emission permits emerged during the 1980s, they had elementary design features that reflected the traditional objectives and skills of environmental economists in regulating local pollutants from relatively few sources. Today, carbon markets are much more complex, having evolved structurally and weathered the impacts of business cycles and the financial crisis. This evolution has raised topical questions on subjects including permit market responsiveness, impacts on firm performance, ambition levels, anti-leakage provisions and inter-connectedness. This one-day event, organised by the Grantham Research Institute at the London School of Economics, will bring together top academics and policymakers to map and explore the frontiers of research on carbon markets and their implications for policy. It will feature invited presentations of cutting-edge theoretical and empirical research on carbon markets as well as keynote speeches by Frank J. Convery, Carolyn Fischer and Bard Harstad. A panel consisting of senior policymakers (tbc) will reflect on the policy implications of the research presented and highlight areas where existing knowledge gaps are the most pressing.