ABSTRACT
Carbon markets have become one of the pillars of climate politics. The chapter describes how the idea of using market instruments in the field of climate change developed, why it became popular and what kind of markets exist. In a second step individual markets (the EU ETS, national and subnational approaches, the CDM and voluntary markets) are analysed and their pros and cons are compared. Finally, the chapter provides a short overview of recent developments towards sectoral approaches. The argument of the chapter is that carbon markets share many characteristics of other financial markets but they also are different in some important and potentially beneficial ways.
