This paper introduces a novel approach to estimating the impact of the major factors driving CO2 emissions: GDP, energy consumption, population, their carbon intensities, and other related indicators that may be chosen arbitrarily. The suggested approach is based on the generalization of the...

If emissions are stochastic and firms are unable to control them through abatement, the cap in a permit market may be exceeded, or not be reached. I derive a binary options pricing formula that expresses the permit price as a function of the penalty for noncompliance and the probability of an...