Conference Agenda

 As carbon markets scale toward trillion-dollar valuations and climate finance accelerates globally, the economic framework for comparing greenhouse gas abatement across different pollutants becomes increasingly critical. This session addresses a fundamental challenge in climate economics: how to establish theoretically-grounded and practically-implementable exchange rates between CO2 and superpollutants (methane, nitrous oxide, black carbon, and fluorinated gases) that maximize welfare benefits from climate investments.

 

Current carbon markets predominantly rely on Global Warming Potential (GWP) metrics—a physical measure developed in the 1980s that compares warming effects over arbitrary time horizons. While GWP was innovative for its time, it fails to incorporate crucial economic factors including temporal damage functions, discounting, economic growth trajectories, adaptation dynamics, and distributional considerations. This omission leads to systematic misallocation of climate resources, with recent evidence suggesting methane abatement may be overvalued by 50-75% in current markets, representing billions in suboptimal climate investments.

 

Upcoming research by Carleton, Costello, Fernández Intriago, Meng, and Stock (2026) formally introduces a new framework for an economically sound exchange rate, derived from the ratio of social costs (SCx/SCC). Their work demonstrates that for pollutants like methane, this economic ratio often diverges significantly from standard GWP multipliers depending on the discount rate and damage function convexity.

 

This session brings together leading environmental economists, policymakers, and carbon market practitioners to examine the theoretical foundations of SCx/SCC ratios and explore their application across three critical use cases: (1) social planner optimization for efficient resource allocation, (2) compliance market design and superpollutant integration, and (3) voluntary carbon market crediting standards. The presentations will demonstrate how these ratios can be implemented in each context while addressing practical challenges.

 

The timing is particularly urgent given three developments:

 

1. Market Evolution: The EU-ETS is under review this year, California's cap-and-trade system is reviewing offset protocols, and voluntary carbon markets are experiencing unprecedented growth

2. Policy Windows: International negotiations on Article 6 of the Paris Agreement are establishing global carbon credit frameworks that will shape markets for decades

3. Investment Decisions: Major climate funds and corporate buyers are seeking science-based guidance for portfolio allocation across different greenhouse gas mitigation opportunities

 

This session directly addresses WCERE 2026's themes of market-based environmental policy instruments and climate economics, offering actionable insights for the critical 2025-2030 implementation period of global climate commitments.