Emission Allowance Markets. Teaching Experience in the Subject Microeconomics

This paper delves into the teaching experience on SDG No. 13 of the United Nations 2030 Agenda, which is focused on “Climate Action”. It highlights the importance of emissions trading as a measure to tackle climate change. Despite their interest, traditional economics textbooks do not provide adequate treatment of these markets, making them difficult for students to understand. Therefore, a collaborative learning experience is developed where students simulate being firms in different scenarios: (i) uniform distribution of permits without allowing an emission market, (ii) uniform distribution with an emission market, (iii) unequal distribution with an emission market and (iv) a tax on emissions. Students realize how emission allowance markets are an efficient mechanism for emission reductions and independent of the initial allocation of allowances. They also learn how the implementation of an emissions tax provides a similar result to the emission trading markets. In short, this teaching experience provides students with a more solid understanding of emission markets and their role in climate action.