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Scale and benefit of global carbon markets under the 2 °C goal: integrated modeling and an effort-sharing platform

Author

Listed:
  • Lining Wang

    (Tsinghua University
    Tsinghua University
    CNPC)

  • Wenying Chen

    (Tsinghua University
    Tsinghua University)

  • XunZhang Pan

    (China University of Petroleum-Beijing)

  • Nan Li

    (Tsinghua University
    Tsinghua University)

  • Huan Wang

    (Tsinghua University
    Tsinghua University)

  • Danyang Li

    (Tsinghua University
    Tsinghua University)

  • Han Chen

    (Tsinghua University
    Tsinghua University)

Abstract

Global climate change mitigation needs all countries’ efforts under the United Nations Framework Convention on Climate Change’s guideline of equity and common but differentiated responsibilities and respective capabilities. The medium-to-long term regional emissions pathways simulated by integrated assessment models with global mitigation costs minimized to achieve the 2 °C goal might be very different from the regional emissions allowances allocated based on effort-sharing principles. Global carbon trading is a cost-effective mechanism to bridge the gap. Insight of previous papers has mainly focused on the impact of a single effort-sharing scheme on global carbon market, while this study attempts to explore the scale and benefit of global carbon market under different effort-sharing principles to achieve the 2 °C goal, with the application of a consistent modeling framework, consisting of an integrated assessment model and an effort-sharing platform. The results indicate that scale of global carbon market would be highly related with the effort-sharing principles. The global trading volumes would change from 1.8 Gigatons (Gt) carbon dioxide (CO2) to over 12 GtCO2 per year and largely peak between 2030 and 2040 under different kinds of effort-sharing principles. Correspondingly, annual global finance flows in the carbon market would increase gradually and reach the scale of hundreds of billions United States (US) dollars since 2020. Global carbon market would lower the abatement costs of developed countries, and the overall global abatement costs would drop by 0.4–2.6% during 2011–2050. The developing countries would not only acquire revenues from global carbon trading but also be provided with an opportunity to accelerate their domestic low-carbon energy transformation, local environmental improvement, job creation, and economic development. Linking national and regional carbon markets to develop global carbon market will be critical to maximize the utility of the market mechanism.

Suggested Citation

  • Lining Wang & Wenying Chen & XunZhang Pan & Nan Li & Huan Wang & Danyang Li & Han Chen, 2018. "Scale and benefit of global carbon markets under the 2 °C goal: integrated modeling and an effort-sharing platform," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 23(8), pages 1207-1223, December.
    • Handle: RePEc:spr:masfgc:v:23:y:2018:i:8:d:10.1007_s11027-018-9781-4
    DOI: 10.1007/s11027-018-9781-4
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    Cited by:

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    2. Huiying Ye & Qi Zhang & Xunzhang Pan & Arash Farnoosh, 2020. "Market-induced carbon leakage in China’s certified emission reduction projects," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 25(6), pages 987-1012, August.
    3. Meng, Bin & Wei, Bangguo & Yang, Mo & Kuang, Haibo, 2023. "Measuring the time-frequency spillover effect among carbon markets and shipping energy markets: A global perspective," Energy Economics, Elsevier, vol. 128(C).

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