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Financials threaten to undermine the functioning of emissions markets

Quemin, Simon and Pahle, Michael (2023) Financials threaten to undermine the functioning of emissions markets. Nature Climate Change, 13 (1). 22 - 31. ISSN 1758-678X

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Identification Number: 10.1038/s41558-022-01560-w


The participation of financial actors is a key design issue in all emissions allowance markets. Although financials perform several necessary market functions, excessive speculation may undermine market functioning. The potential for harm is gaining prominence as tighter emission limits increasingly attract speculators and investors into allowance markets worldwide. However, adequate warning systems and tools to appraise the beneficial and detrimental facets of financial trading are wanting. We develop preliminary elements of a diagnostic toolbox to assess the scale and impacts of speculation and apply it to the EU emissions trading system. This Perspective seeks to inform current policy debates and invites further research to establish speculation-monitoring systems for allowance markets.

Item Type: Article
Official URL:
Additional Information: © 2022, Springer Nature Limited.
Divisions: Grantham Research Institute
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
Date Deposited: 19 Jan 2023 12:39
Last Modified: 04 Dec 2023 07:27

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