A Global Carbon Market and the Allocation of Emission Rights

The paving of the way for a new climate agreement has turned out to be extremely challenging. The negotiators struggle to make the required emissions reductions binding under international law and to agree on burden-sharing amongst nations. Despite the fact that the G8 (Major Economics Forum 2009 ) as well as the Copenhagen Accord (UNFCCC 2010 ) refer to the 2°C target, the current pledges of the nations would lead to a temperature increase of more than 3°C by 2100 (Rogelj et al. 2010 ) and even in the most optimistic scenario a considerable gap of 5 GtCO 2 e would remain (UNEP 2011 ) . A reasonable climate policy architecture thus needs to (1) specify a binding overall carbon budget that is in line with the 2°C target, (2) decide on the regional allocation of this budget and (3) create the institutional framework for a global carbon market. Given that the 2°C target implies that a certain budget of emissions may continue to be emitted (see Chap . 13 ), it is debated how these emission rights could be allocated among the nations (e.g. WBGU 2009 ; den Elzen and Höhne 2010 ; Chakravarty et al. 2009 ) . The national emission reduction commitments (e.g. the pledges in the Copenhagen Accord, 2009) and possible allocation rules of an emission budget play a major role in international negotiations. The idea prevails that these allocations will determine the distribution of the burden of climate protection. Here we emphasise the importance of an international emission trading scheme (ETS). We also