Introducing the optimal carbon market: A comparative analysis of current conditions across four regions

Title : Introducing the optimal carbon market: A comparative analysis of current conditions across four regions

Abstract:

As carbon pricing becomes increasingly central to global climate mitigation strategies, significant variations in effectiveness persist across different implementations. This study evaluates and compares carbon pricing mechanisms in four major economies, the European Union, China, Canada, and Singapore, against an ideal total demand score of 5, assessing their progress toward optimal climate policy design.

Our analytical framework examines five critical dimensions of effectiveness: (1) carbon price levels, (2) market coverage, (3) emission reduction targets, (4) regulatory robustness, and (5) support for innovation. The results reveal a spectrum of performance, with the EU's Emissions Trading System (ETS) emerging as the current leader (3.8/5), followed by Singapore's carbon tax (2.5/5), Canada's hybrid system (2.0/5), and China's national ETS (1.8/5).

Three key findings emerge from this analysis. First, all existing systems fall short of the ideal benchmark, indicating the universal need for improvement. Second, the EU ETS demonstrates that comprehensive coverage, strong price signals, and rigorous enforcement can deliver superior results. Third, while other systems show promise, they currently face structural limitations in price stability, sectoral coverage, or regulatory enforcement.

Based on these findings, we recommend: (1) immediate adoption of the EU model's best practices where feasible, (2) targeted reforms to address specific weaknesses in each system, and (3) enhanced international coordination to accelerate convergence toward more effective carbon pricing. This research provides policymakers with a clear roadmap for strengthening carbon markets to meet urgent climate challenges.

Keywords: Carbon Pricing; Climate Mitigation; Emissions Trading System (ETS); International Comparison; Policy Effectiveness

Biography:

Mohammad Imran Azizi is a PhD student at Tongji University, China, with academic and research experience in Environmental Science and Engineering. He holds a Master’s degree in Environmental Science and Engineering from Tongji University and a Bachelor’s degree in Forestry and Environmental Science. His research interests include carbon pricing, climate change, environmental policy, sustainable development, carbon markets, and environmental management. He has published research in international journals and has contributed to studies addressing global carbon pricing strategies and climate mitigation. He also has university-level teaching, research, and administrative experience in Afghanistan.