Lecture Kleinman Center Event

Robust Carbon Markets: Rethinking Quantities and Prices

Speaker

Dallas Burtraw
Darius Gaskins Senior Fellow, Resources for the Future

Moderator

Mark Hughes
Founding Faculty Director, Kleinman Center for Energy Policy

Location

Kleinman Center for Energy Policy
220 S. 34th Street
Philadelphia, PA 19104

Carbon markets face price erosion challenges caused by policies that encourage renewables. To overcome this, the Regional Greenhouse Gas Initiative (RGGI) implemented an emissions containment reserve. Explore the RGGI approach.

Event Summary

Environmental policy with uncertainty is often posed as a choice between a price (tax) versus a quantity (cap and trade) instrument. In practice, the dominant approach across the globe is cap and trade, but the quantity targets (emissions caps) are typically over-achieved and the prices in these markets are typically lower than anticipated. One reason for low prices is the contribution to emissions reductions from companion policies that promote technologies such as renewable energy and energy efficiency. Paradoxically, the success of companion policies in reducing emissions has the unintended effect of undermining confidence in carbon markets by driving down prices in those markets, and the “waterbed” effect in the carbon market may erode the emissions reductions. This presentation evaluates a new approach that has been implemented in the Regional Greenhouse Gas Initiative called the emissions containment reserve. This mechanism automatically increases stringency when prices are lower than expected, improves cost-effectiveness, and reinforces the contribution of companion policies to achieving emissions goals.

View the Presentation

Robust Carbon Markets: Rethinking Quantities and Prices

Dallas Burtraw

speaker

Dallas Burtraw

Darius Gaskins Senior Fellow, Resources for the Future
Dallas Burtraw is the Darius Gaskins Senior Fellow at Resources for the Future. Burtraw was a 2018-2019 visiting scholar at the Kleinman Center.
moderator

Mark Hughes

Founding Faculty Director
Mark Alan Hughes leads the Kleinman Center as founding faculty director and publishes research on topics ranging from deep decarbonization to the future of Philadelphia’s energy landscape. He is also a professor of practice at the Weitzman School.