The best way to reduce carbon emissions and combat climate change is through the use of market forces reveals a new study.
Researchers have monitored the effectiveness of the European Climate Exchange (ECX), as the world's biggest carbon trading platform.
The ECX was created by the EU Emissions Trading Scheme (EU-ETS) in 2005 to help the European Union (EU) achieve its obligations under the Kyoto Protocol to reduce carbon emissions.
Using free market platforms like the ECX to combat climate change could provide the basis for the introduction of a mandatory emissions cap and trade scheme worldwide.
The report has found that the value of the trades on the ECX were higher after the market closed, a sign of growing sophistication within platforms. It means that trades were made with greater confidence based upon increasingly detailed information.
Researchers have said that there are also signs of maturity based on increased liquidity and price efficiency, which means all available information is incorporated into prices so they are traded in a relatively transparent manner.