Recognizing Gravity as a Strong Force in Atmosphere Emissions Markets
Open accessAbstract
Environmental economics has made it possible to estimate prices for air pollution externalities. However, these values are rarely observed in emissions trading markets. Moreover, market outcomes show prices persistently remain below expectations and frequently fall over time. Low allowance prices may appear virtuous, but often reflect poor market design that does not anticipate interaction with other policies, and may undermine confidence in market-based approaches to environmental policy. This paper surveys emissions markets and factors influencing prices, and concludes with a discussion of how market design can anticipate and remedy the strong tendency for low prices.
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Emissions trading with rolling horizons
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“…distortions, related to, e.g., investors’ myopia and policy uncertainty, drive allowance prices to excessively low (i.e., welfare-decreasing) levels (Burtraw and Keyes, 2018).17 When a price floor is operationalised through the cancellation of allowances, there is a permanent adjustment in…”
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- Authors
- Burtraw, D., & Keyes, A.
- Corresponding author
- Burtraw, Dallas
- Venue
- Agricultural and Resource Economics Review
- Publisher
- Cambridge University Press (CUP)
- Published
- 2018-08
- Volume
- 47
- Issue
- 2
- Pages
- 201-219
- ISSN
- 1068-2805 (ISSN-L)
- 2372-2614
- OpenAlex
- W2888299123
- Cited by
- 21
- References
- 3
- Citations by year
- 2025: 1 · 2024: 2 · 2023: 1 · 2022: 7 · 2021: 6 · 2020: 1 · 2019: 3
- FWCI
- 3.80
- Type
- journal article
- Language
- en
- Open access
- gold
- doi.org
- Locations
- Agricultural and Resource Economics Review (publishedVersion, cc-by)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Physical Sciences › Environmental Science › Environmental Engineering › Environmental and Air Quality Management
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Energy, Environment, Economic Growth
- Keywords
- emissions trading, allowance prices, market design, price persistence, environmental policy, market-based environmental policy, carbon pricing
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