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Greenhouse-gas-trading markets
Richard Sandor1, Michael Walsh, Rafael Marques
1Environmental Financial Products LLC, Suite 1404, 111 W. Jackson, Chicago, IL 60604, USA.
Summary
New greenhouse gas (GHG) trading markets are emerging globally to address climate change. These markets aim to provide crucial price information on mitigation costs, aiding policymakers in developing effective climate change policies.
Area of Science:
- Environmental Economics
- Climate Policy
- Market Mechanisms
Background:
- Growing consensus on using market mechanisms to combat human-induced climate change.
- Development of carbon trading markets in the UK, EU, and North America.
- Significant information gaps exist regarding climate change damages and GHG mitigation costs.
Purpose of the Study:
- To summarize new market mechanisms for environmental services.
- To explain the importance of price information for greenhouse gas (GHG) mitigation costs.
- To present the rationale and objectives for pilot GHG trading markets.
Main Methods:
- Describing steps to define and launch pilot carbon markets in North America and Europe.
- Reviewing key issues for incorporating carbon sequestration into emissions trading.
- Designing and implementing organized carbon trading markets, such as the Chicago Climate Exchange.
Main Results:
- Pilot carbon markets are being established in North America and Europe.
- The Chicago Climate Exchange facilitates trading across energy, industry, and land use sectors.
- Trading provides price discovery, clarifying the costs of various climate change mitigation options.
Conclusions:
- Closing the information gap on mitigation costs empowers better policy decisions.
- Experience with carbon sequestration credits demonstrates a viable financing tool for sustainable land management.
- Market mechanisms are crucial for addressing climate change risks and promoting long-term sustainability.