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How Low Can It Go? Analysing the Political Economy of Carbon Market Design and Low Carbon Prices

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  • Kate Ervine

Abstract

Despite the ascendency of carbon pricing as a key regulatory strategy for governing anthropogenic climate change, insufficient attention has been paid to the issue of price discovery in emission trading schemes, now the dominant form of carbon pricing globally. By analysing the political economy of carbon market design, this paper highlights a number of design features that are instrumental in depressing carbon prices across the world’s emission trading schemes, keeping them well below those considered necessary to spur deep emission reductions in order to avoid catastrophic global warming. In doing so, it advances critiques of carbon trading by illuminating the extent to which carbon markets manifest as expressions of specific power relations rooted in the political economy of advanced capitalism, with low prices ensuring minimal disruption to business as usual.

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  • Kate Ervine, 2018. "How Low Can It Go? Analysing the Political Economy of Carbon Market Design and Low Carbon Prices," New Political Economy, Taylor & Francis Journals, vol. 23(6), pages 690-710, November.
    • Handle: RePEc:taf:cnpexx:v:23:y:2018:i:6:p:690-710
    DOI: 10.1080/13563467.2018.1384454
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    Cited by:

    1. Wei, Yigang & Liang, Xin & Xu, Liang & Kou, Gang & Chevallier, Julien, 2023. "Trading, storage, or penalty? Uncovering firms' decision-making behavior in the Shanghai emissions trading scheme: Insights from agent-based modeling," Energy Economics, Elsevier, vol. 117(C).
    2. Wei, Yigang & Li, Yan & Wang, Zhicheng, 2022. "Multiple price bubbles in global major emission trading schemes: Evidence from European Union, New Zealand, South Korea and China," Energy Economics, Elsevier, vol. 113(C).
    3. Hu, Yuan & Kuhn, Lena & Zeng, Weizhong & Glauben, Thomas, 2023. "Who benefits from payments for ecosystem services? Policy lessons from a forest carbon sink program in China," Ecological Economics, Elsevier, vol. 214(C).
    4. Lukas Baumbach & Thomas Hickler & Rasoul Yousefpour & Marc Hanewinkel, 2023. "High economic costs of reduced carbon sinks and declining biome stability in Central American forests," Nature Communications, Nature, vol. 14(1), pages 1-11, December.
    5. Teun Schrieks & Julia Swart & Fujin Zhou & W. J. Wouter Botzen, 2023. "Lobbying, Time Preferences and Emission Tax Policy," Economics of Disasters and Climate Change, Springer, vol. 7(1), pages 1-32, March.
    6. Muth, Daniel, 2023. "Pathways to stringent carbon pricing: Configurations of political economy conditions and revenue recycling strategies. A comparison of thirty national level policies," Ecological Economics, Elsevier, vol. 214(C).
    7. Michael Jakob & William F. Lamb & Jan Christoph Steckel & Christian Flachsland & Ottmar Edenhofer, 2020. "Understanding different perspectives on economic growth and climate policy," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 11(6), November.

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