Impacts and Benefits of State and International Carbon Market Systems to Achieve Emissions Reduction Goals

Abstract

Greenhouse gas (GHG) emissions are projected to continue increasing through 2040, resulting in at least a 1.5°C increase in global temperatures, as modeled by the Intergovernmental Panel on Climate Change (IPCC).¹ The near-term IPCC modeling scenarios include extreme and concurrent hazards, with unequal distribution of warming across geographies and impacts on industries, and socioeconomic communities and populations.² Globally, 41 percent of carbon dioxide (CO₂) emissions are attributed to the energy sector.³ The United States is responsible for 12.5 percent of the global emissions, with China as the second largest GHG emitter.⁴ In efforts to reduce emissions, an increasing number of governments and regulating bodies are employing a variety of policy mechanisms, creating carbon markets to incentivize companies to invest in innovative and efficient clean energy technologies. Among these policies is a cap-and-trade or a cap-and-invest (C&I) framework impacting the largest emitters. The C&I framework is intended to hold industries accountable while allowing individual companies to buy, sell, trade, or invest allowances for carbon emissions.