Conference Agenda

To mitigate carbon emissions, policymakers increasingly deploy hybrid systems combining emissions trading schemes (ETS) with offset mechanisms—two complementary market instruments formally characterized as "dual-track carbon pricing". The fungibility between allowances and offsets enables compliance substitution, creating dynamic price interdependencies governed by no-arbitrage principles. This study develops a stochastic pricing model integrating asset pricing theory with abatement dynamics to examine how adjusting offset import limits affects market equilibrium. Our simulations demonstrate that expanding the import limit depresses allowance prices through dual channels: (1) direct demand reduction and (2) delayed abatement investment cycles. These interactions generate feedback effects where offset prices respond to allowance price fluctuations and expanded market participation. With China's Chinese Certified Emission Reduction (CCER) market relaunch, our conclusions are of great importance for China's carbon market policy. Given the differential impacts on the prices of these two carbon assets, the offset import limit can be adjusted based on market expectations to influence the price and spread of carbon assets, thereby ensuring that the advantages of CCER are used without adversely affecting the allowance price.

To reduce CO_{2} emissions from road transport, many countries and regions like the US, EU, China and Japan heavily rely on “efficiency standards” for vehicle emissions or fuel economy. These standards typically set limits on fuel consumption (e.g., litres per 100 km) or CO₂ emissions (grams per km or mile) for new vehicles. It is therefore a quantity-based instrument. Vehicle emissions and fuel economy standards usually must not be met for individual vehicle types, but for the whole fleet of a manufacturer. Moreover, manufacturers can often group together to meet their target, which amounts to trading of compliance surpluses and deficits. We show that implementing subsidies for battery electric vehicles (BEVs) in a regulatory framework of fuel economy standards make it easier to attain the fuel economy standard, from which gas guzzlers benefit the most, whereas efficient compact cars that meet the standard are negatively affected. Since there is no absolute cap, BEV subsidies will often actually increase total emissions.

This paper develops a dynamic behavioural model of the European Union Emissions Trading System (EU ETS) to analyse the impact of speculation and credibility shocks on permit prices and emissions. The model incorporates compliance firms and speculators, who follow distinct trading strategies – fundamentalist, noise trading, and trend-following. Calibrated to EU ETS data, we find that speculation has a non-monotonic effect on prices and emissions: at low levels, it slightly raises prices and reduces emissions, while at higher levels, it depresses prices, delays abatement, and amplifies volatility. Negative credibility shocks significantly affect prices and emissions, with their impact depending on the timing of the shock, and speculation prolonging their effects. Finally, we examine a reform to the Market Stability Reserve (MSR) in which the upper and lower thresholds are gradually reduced. Our results show that this reform accelerates emissions reductions and enhances the system’s resilience to speculation and credibility shocks.

This paper examines the strategic effects of carbon pricing, free allocation, and the Carbon Border Adjustment Mechanism (CBAM) on firms’ investment decisions, emissions, and competitiveness within the European Union Emissions Trading System (EU ETS). Using a Cournot competition framework, we analyze how different regulatory settings influence domestic and foreign firms’ incentives to invest in green technologies and adjust production levels.

Our findings reveal that carbon pricing has a non-monotonic impact on domestic green investment: at low price levels, firms increase investment, but at higher prices, output contraction and strategic interactions with foreign competitors offset these gains. Free allocation mitigates the competitiveness effects of carbon pricing but introduces complex trade-offs, as it can lead to higher global emissions when foreign producers operate with sufficiently low emissions intensity. In contrast, CBAM serves as a more effective tool for preventing carbon leakage, incentivizing both domestic and foreign investment in green technologies, and reducing global emissions—though at the cost of lower total output and reduced consumer welfare.

These results highlight the importance of carefully calibrating carbon pricing instruments to balance emissions reductions, firm competitiveness, and consumer welfare. Our analysis provides key insights into the transition from free allocation to CBAM and its implications for the future of international climate policy.

This paper explores the relationship between market concentration and environmental performance, with a particular focus on the aftermath of mergers. Drawing from foundational economic principles, I hypothesize that increased market power, typically associated with reduced output relative to competitive market conditions, could similarly influence a firm’s emissions profile, potentially lowering GHG emissions. This hypothesis introduces a complex tension between two pivotal policy objectives: the reduction of emissions and the preservation of competitive market structures. Novel empirical findings suggest that mergers exhibit a comparable positive impact on environmental indicators, as companies exhibits lower emissions following a merger. This insight paves the way for a broader discussion on the dual objectives of companies in merger scenarios — increasing their market power versus achieving environmental efficiency.