@inbook{82dbf33d34a04889a82398d8bfd23c8b,
title = "The Clean Development Mechanism and Joint Price Formation for Allowances and CERs",
abstract = "The goal of this paper is to propose an equilibrium model for the joint price formation of allowances issued by regulators in the framework of a cap-and-trade scheme and offset certificates such as CERs generated within the framework of the Clean Development Mechanism (CDM) or the Joint Implemenation (JI) of the Kyoto Protocol. Thereby we consider a system of cap-and-trade schemes, such as, e.g., the EUETS and a possible American Market (USETS) or Japan ETS, which are linked indirectly by the Clean Development Mechanism and for which banking is allowed. Besides deriving equilibrium price formulas for the joint price dynamics of these linked markets, the main thrust of the paper is to explain the spreads between European emission allowances EUAs and CERs as observed historically.",
keywords = "Environmental risk, Kyoto protocol, cap-and-trade, carbon markets, energy economics",
author = "Ren{\'e} Carmona and Max Fehr",
note = "Funding Information: First author partially supported by NSF: DMS-0806591. Second author partially supported by the Munich Re Programme within the Centre for Climate Change Economics and Policy, London School of Economics. Both authors would like to thank the referee for constructive comments which led to a significant improvement of the paper. Part of this paper was written while the second named author was at the Institute for Operations Research at ETH Z{\"u}rich. Funding Information: First author partially supported by NSF: DMS-0806591. Second author partially supported by the Munich Re Programme within the Centre for Climate Change Economics and Policy, London School of Economics. Publisher Copyright: {\textcopyright} 2011, Springer Basel AG.",
year = "2011",
doi = "10.1007/978-3-0348-0021-1_21",
language = "English (US)",
series = "Progress in Probability",
publisher = "Birkhauser",
pages = "341--383",
booktitle = "Progress in Probability",
}