Carbon markets—basic principles and future developments
Produced in partnership with Navraj Singh Ghaleigh of Senior Lecturer in Climate Law, University of Edinburgh
Carbon markets—basic principles and future developments

The following Environment practice note produced in partnership with Navraj Singh Ghaleigh of Senior Lecturer in Climate Law, University of Edinburgh provides comprehensive and up to date legal information covering:

  • Carbon markets—basic principles and future developments
  • Brexit impact
  • Details for emissions trading and carbon pricing
  • Basic principles
  • Future developments
  • EU ETS—prospects
  • Paris Agreement—Article 6
  • Future of the Kyoto Protocol
  • Brexit and the EU ETS, carbon price support and the carbon emissions tax

Brexit impact

11 pm (GMT) on 31 December 2020 marks the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. Any changes relevant to this content will be set out below. For further guidance, see Practice Note: Brexit—impact on environmental law and News Analysis: Brexit Bulletin—key updates, research tips and resources.

Details for emissions trading and carbon pricing

For further information on the impact of Brexit on emissions trading and carbon pricing, see Practice Note: Brexit—emissions trading and carbon pricing.

Basic principles

Carbon markets operate within the ‘science’ of economics, the study of the allocation of scarce resources between competing ends (Lionel Robbins, An Essay on the Nature & Significance of Economic Science (2nd edn, revised and extended, 1949), Ch 1.3).

Within this framework, a decent environment is just such a scarce resource. The core claim of carbon markets is that by assigning property rights to greenhouse gas emissions (‘putting a price on carbon’), market actors can allocate the use of this property in a cost-effective way. Accordingly, a given emissions objective (say, reducing emissions by 90% by 2050) is achieved at the lowest cost.

By putting a price on carbon, markets

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