We analyze the price dynamics of European allowances and international carbon credits in the second phase of the European carbon market. We develop and use a model combining fundamental drivers associated with the demand for quotas by installations and risk-return considerations related to the...

The Paris Agreement established a new mechanism by which a country can offset some of its emissions reductions in other countries. Its design is still under negotiation. While taking advantage of cheaper abatement opportunities enables efficiency gains, the impact on the price volatility in the...