What impacts can intertemporal trading have on carbon markets across different development stages? An economy-wide analysis

Zhang, S.-X., Jiang, H.-D., Yan, S.-Y., Purohit, P. ORCID: https://orcid.org/0000-0002-7265-6960, Yao, Y.-F., & Liang, Q.-M. (2027). What impacts can intertemporal trading have on carbon markets across different development stages? An economy-wide analysis. Environmental Impact Assessment Review 123 e108755. 10.1016/j.eiar.2026.108755.

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Abstract

Carbon markets have encountered challenges such as limited flexibility and substantial price volatility. Intertemporal trading mechanisms, as one of the important ways of green finance, have been proposed as a potential solution to improve market efficiency. However, existing studies frequently overlook whether the intricate internal mechanisms of carbon markets are suitable for introducing intertemporal trading. To comprehensively analyze the effect of intertemporal trading, this study employs a computable general equilibrium model incorporating an intertemporal dynamic mechanism and a carbon market module. This study designs scenarios focusing on total quotas, sectoral coverage, quota allocation, and intertemporal trading to simulate and compare their macroeconomic impacts. The results suggest that intertemporal trading is particularly beneficial in carbon markets that prioritize later-stage reduction, experience rapid sectoral coverage, or have a high auction rate. Under these conditions, introducing intertemporal trading can help reduce long-term carbon prices while promoting the development of cumulative GDP and household welfare. It is noted that the output of sectors covered by the carbon market undergoes an initial contraction in the early stage, followed by a gradual increase in the later stage.

Item Type:	Article
Uncontrolled Keywords:	Carbon market; CGE model; Intertemporal trading; Socio-economic indicators; Economy-wide impacts
Research Programs:	Energy, Climate, and Environment (ECE) Energy, Climate, and Environment (ECE) > Pollution Management (PM)
Depositing User:	Luke Kirwan
Date Deposited:	25 Sep 2026 10:21
Last Modified:	25 Sep 2026 10:21
URI:	https://pure.iiasa.ac.at/21899

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