Emission Certificate Trade and Costs under Regional Burden-Sharing Regimes for a 2˚C Climate Change Control Target

In this article we explore regional burden-sharing regimes for the allocation of greenhouse gas emission reduction obligations needed to reach a 2°C long-term global climate change control target by performing an integrated energy-economy-climate assessment with the bottom-up TIAM-ECN model. Our main finding is that, under a burden-sharing scheme based on the allowed emissions per capita, the sum of merchandized carbon certificates yields about 2000 billion US$/yr worth of inter-regional trade around 2050, with China and Latin America the major buyers, respectively Africa, India, and other Asia the main sellers. Under a burden-sharing regime that aims at equal cost distribution, the aggregated amount of transacted carbon certificates involves less than 500 billion US$/yr worth of international trade by 2050, with China and other Asia representing the vast majority of selling capacity. Restrictions in the opportunities for international certificate trade can have significant short- to mid-term impact, with an increase in global climate policy costs of up to 20%.