Key Determinants of Price Setting and Change in the Carbon Market

As greenhouse gas emissions are increasing year by year, both developed and developing countries are seeking to incentivize their reduction through emissions trading. Therefore, the price of a carbon unit becomes a driver of change in greenhouse gas emissions. In this regard, understanding how the price of a carbon unit is formed becomes particularly relevant. The object of the study is the combination of factors and conditions of formation of prices for carbon credits as tools for reducing greenhouse gas emissions. The purpose of the study is to identify the key determinants of establishing and changing the price of carbon credits. In the process of writing the article we used both general scientific research methods: analysis, synthesis, generalization and classification of data, and special economic and mathematical methods, including correlation and regression analysis. The article investigated the European, New Zealand and Korean carbon unit trading systems. It was concluded that there are clusters of volatility in their markets of carbon units. The key determinants of carbon price volatility and factors contributing to their growth were identified: the price of crude oil, gas, coal, gasoline; shocks causing recession; the total volume of carbon emission quotas on the market; the volume of free allocated quotas; the number and list of industries covered by the system of trading in quotas. As a result, the stages of forming a price for carbon units for the purpose of reducing greenhouse gas emissions were determined and justified. The results obtained in the course of the study and the recommendations developed are aimed at creating a market for carbon units in Russia and improving its efficiency in comparison with existing practices. The results obtained will be used for further fundamental research and practical developments in the field of greenhouse gas emissions trading.

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