Environmental economics has made it possible to estimate prices for air pollution externalities. However, these values are rarely observed in emissions trading markets, as the stringency of these markets is often most dependent on political negotiations, and allowance prices typically fall below the marginal benefits of emissions reductions. Moreover, the political narrative of emissions markets has focused on concern for potential allowance price increases—yet 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.
Recognizing Gravity as the Strong Force in Atmosphere Emissions Markets
This paper surveys emissions markets and factors influencing emissions allowance prices. It examines the consequences of the strong tendency for low prices and discusses how market design can anticipate and remedy this tendency.Download
Journal Article — Nov 2, 2019
How to Avoid History Repeating Itself: The Case for an EU Emissions Trading System (EU ETS) Price Floor Revisited
In this article, the authors identify and confront four prominent arguments against the introduction of a European Union emissions trading scheme price floor.
Testimony and Public Comments — Oct 30, 2019
Hearing on Building a 100 Percent Clean Economy: Solutions for the Power Sector
Written Testimony Prepared for the Energy Subcommittee of the US House Committee on Energy and Commerce
Issue Brief — Oct 21, 2019
Options for Issuing Emissions Allowances in a Pennsylvania Carbon Pricing Policy
We explore policy design elements for a potential electricity sector carbon cap in Pennsylvania.