Abstract for: Modeling Dynamics of the Carbon Market: A System Dynamics Approach on the CO2 Emissions and its Connections to the Oil Market

Global warming poses a real threat to the sustainable development. The temperature data shows that unless the greenhouse gas emissions are controlled, the global temperature can rise critically by the end of the century. The Emission Trading System (ETS) has been introduced to control the emissions in the participating countries by providing economic incentives to the industries and manufacturers to shift towards cleaner energy resources and technologies. In this paper, we study the main variables and causes behind the emissions, and investigate the mechanisms on the carbon market, particularly the European Union ETS. We also provide an updated oil market model to include the recent data and developments in the global oil market. We connect the two models to each other so that the effects of the oil price on the climate change can be investigated. Next, we train our model with the historic data and simulate it to show the capability of the proposed model in predicting the trends of the historic data. Finally, we provide simulation results to support our model.