Pricing of Carbon Emission Exchange in the EU ETS

Carbon emission exchange originated from emission trading proposed by economists in the 1970s. Carbon trading, an important environmental policy in market economy countries, has emerged as the foremost policy instrument for reducing worldwide greenhouse gas emission. The United Nations Intergovernmental Panel on Climate Change (UNIPCC) passed the United Nations Framework Convention on Climate Change (UNFCC) on June 4, 1992. The Kyoto Protocol, passed in December 1997, the first additional convention, uses the market mechanism as a new way to resolve the issue of greenhouse gas reduction, of which carbon emission is the most prominent. Thus carbon emission rights become a tradable commodity, leading to the emergence of a carbon emission exchange mechanism.