A carbon bank managing volatility in a cap-and-trade system

Summary: A cap-and-trade system can be effective in spurring the transition to a low-carbon economy, if the challenges associated with it, mainly price volatility, are addressed. Many jurisdictions, including Australia and the United States, have explored the possibility of using a carbon bank as a potential tool to manage the volatility of carbon allowance pricing, in support of the overall policy objectives of the government. A carbon bank is an independent body, separate from political influence, responsible for oversight and management of the carbon market.