The Political Economy of Carbon Trading

Authors: Reinhardt, Forest; Trumbull, Gunnar; Hyman, Mikell; McGrath, Patia; Aragon, Nazli Z. Uludere
Source: Harvard Business School
Year: 2010
Number of pages: 55

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Abstract:

Global climate change is an increasingly prominent political and business problem. Design of market-based systems to reduce carbon emissions has proven difficult. More broadly, national attempts to comply with the provisions of the Kyoto Protocol present both governments and firms with significant challenges. The design of international institutions that will be useful for managing change after the Kyoto period is a challenge both for Kyoto ratifiers and for countries like the United States that have not ratified the agreement. Creation of a post-Kyoto treaty on climate change requires agreement by China and the United States, the world's largest carbon emitters. The case summarizes the science and economics of climate change and encourages readers to contemplate the strategic and risk management problems that it presents to government officials and to business leaders in developed countries and in the developing world.