Keywords
markets, trading, climate
Abstract
This paper serves as a review of emission trading systems as a means to achieve reductions in the level of greenhouse gas emissions and other pollutants around the world. The review begins with the history of emission trading, beginning with early theoretical frameworks developed by economists in the 1960s and 1970s, followed by early implementations of permit markets similar to modern day emission trading systems. International negotiations related to emission reductions such as the Kyoto Protocol and Paris Agreement are discussed. Next, the economic mechanisms of emission trading systems are discussed, including a brief comparison to carbon taxes as an alternative market based implement to enact emission reductions. Finally, primary failures of emission trading systems are presented, showcasing some of the downfalls of such systems. The conclusion of this paper is that while emission trading systems provide a means to achieve a specified level of emission reductions at minimal cost, their dependence on the target level of reductions defines their effectiveness at reducing emissions. While not guaranteed to effectively reduce emissions, emission trading systems remain a powerful administrative tool to reduce the burden of cost when faced with meeting emission targets.
Primary Advisor
Yuntong Wang
Program Reader
Sang-Chul Suh
Degree Name
Master of Arts
Department
Economics
Document Type
Major Research Paper
Convocation Year
2019