CCCEP II: Evolution of carbon markets 2013-2018

In the last ten years, the use of markets to reduce pollution, particularly carbon emissions, has come of age. When markets for emission permits emerged during the 1980s, they had elementary design features, reflecting the traditional objectives and skills of environmental economists in regulating local pollutants from limited sources. Today, emission permits markets are infinitely more complex, having evolved structurally and weathered the impacts of unexpected shocks, most notably the Financial Crisis. The evolution of markets and their reaction to shocks have raised numerous - and previously little explored - questions about the markets' responsiveness and inter-connectedness. This project developed new analytical approaches to address these questions through an inter-disciplinary collaboration between scholars in economics, mathematics and climate.CCCEP was established in October 2008 with the aim of advancing public and private action on climate change through rigorous, innovative research. Even though much of our research is ongoing, we have made several major academic contributions: - Improving understanding of the uncertainties in climate models, developing state-of-the-art economic models of decision-making under uncertainty and applying them to climate change, and pursuing novel methods of participatory assessment/modelling. - Exploring different routes to a global climate agreement and alternatives to state-based governance, all the time emphasising the role of institutions. - Advancing knowledge on the potential for climate-friendly forms of development, and development-friendly forms of adaptation. We have advanced new integrated methodologies for identifying adaptation priorities, including 'vulnerability hotspots'. - Conducting interdisciplinary research on interventions towards a low-carbon economy, including robust econometric evaluation of the impacts of existing policies, analysis of carbon markets that bridges theory and practice, and an examination of the roles of states and markets. - Developing new methodologies bridging the gap between macro-scale simulation modelling and micro-scale, context-specific approaches. To build research capacity, we have strengthened the links between key disciplines and the climate debate, trained over 50 PhD students and provided new university courses at all levels. We have actively engaged with key decision-makers at all stages of the research process, influencing the UN climate negotiations at a high level, working closely with the World Bank and other international organisations, engaging heavily in UK climate policy on critical issues such as the fourth statutory carbon budget, impacting on policy-making in many other countries and engaging with private decision-makers, e.g. through our collaboration with Munich Re. We have also secured c. £28 million in leveraged funding. Extensive consultations have highlighted the need to address the financial crisis/downturn, the continuing absence of a comprehensive international climate treaty, and recent controversies on climate science. They have stressed the need for more integrated approaches to climate research, to continue making a distinctive contribution in the context of other climate research, and to contribute to ESRC Strategic Priorities. Our five research themes for Phase Two are: 1. Understanding green growth and climate-compatible development: what could constitute green growth or climate-compatible development in industrialised and developing countries? 2. Advancing climate finance and investment: how can we unlock major flows of finance into both adaptation and mitigation in different contexts? What are the implications of such flows? 3. Evaluating the performance of climate policies: how can we assess the performance of different climate policies and how can we understand the scope for policy learning? 4. Managing climate risks and uncertainties and strengthening climate services: how can we promote new approaches to the assessment, management and communication of climate risks/uncertainties? 5. Enabling rapid transitions in mitigation and adaptation: how can we understand the scope for rapid transitions to dramatically cut emissions and adapt to significant climate change?