CARBON SPOT PRICES IN EQUILIBRIUM FRAMEWORKS ASSOCIATED WITH CLIMATE CHANGE

At present, it is believed that the best approach to mitigate global warming is the market-based formulation of carbon emission pricing. Thus, in this paper, we work on determining the carbon spot prices in a stochastic equilibrium framework associated with climate change. Two circumstances, differentiated by whether taking carbon trading in the market, are considered. We construct optimization problems and solve them by using dynamic programming principle. The Fourier transform and its properties are fully made use of to return the explicit formulas of carbon prices. In addition, some surprising but interesting properties of the carbon prices are also found. First, the carbon prices happen jumps at the end of the abatement period. Second, the return rates of carbon prices are completely dependent on the climate elements. Finally, we present some numeric results in response to our theoretical results.