Title: A solution for an externality, greenhouse gases: carbon market

Authors: Sara Gurfinkel Marques De Godoy; Maria Sylvia Macchione Saes

Addresses: Faculdade de Economia Administração e Contabilidade, Universidade de São Paulo, Rua Professor Luciano Gualberto, 908 FEA I – sala C16. Butantã, Brazil ' Faculdade de Economia Administração e Contabilidade, Universidade de São Paulo, Rua Professor Luciano Gualberto, 908 FEA I – sala C16. Butantã, Brazil

Abstract: Based on the new institutional economics, Ronald Coase posits that a state should create conditions, through the definition of property rights, for economic agents to freely negotiate so-called 'environmental goods', which can include greenhouse gas (GHG) emissions reduction. In this sense, the carbon trade follows the logic advocated by Coase. Since the carbon market is influenced by many factors, some structures have grown more than others. Relevant examples of market mechanisms are those related to project-based emission reductions, and the cap and trade principle, which establishes limits on GHG emissions based on trade allowances. Given that carbon market solutions are a mechanism created in order to contribute to a decrease in GHG, this paper presents economic theories related to this market; analyses carbon markets with a focus on advantages and problems; and offers an action and development plan for the carbon market road map.

Keywords: clean development mechanism; CDM; Kyoto protocol; emissions reduction; carbon markets; carbon certificates; flexibility mechanisms; European emissions trading scheme; EU ETS; institutional economics; transaction costs; carbon trading; greenhouse gases; GHG emissions; economic theory.

DOI: 10.1504/IJESD.2016.079480

International Journal of Environment and Sustainable Development, 2016 Vol.15 No.4, pp.369 - 391

Available online: 28 Aug 2016 *

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