Emissions trading markets

The US has had a sulphur emissions market for a while. I don’t know as much as I’d like to about emissions trading, and the complexities of the market.

But I saw an interesting CBO piece out recently that focuses on market fundamentals and the abatement price. From their abstract:

Our empirical analysis finds that the SO2 market, similar to other emission markets studied in the literature, had relatively weak influence of market fundamentals for several years after launch—that is, allowance prices did not reflect marginal abatement costs for the first several years of operation. However, we find evidence of increased influence of market fundamentals after the first few years of the program but before a court decision that introduced significant uncertainty into the market in mid-2008.

And now, a chart.
But seriously, you should go read the paper.

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