Economics Dictionary of ArgumentsHome
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| Emissions trading: Emissions trading, or cap-and-trade, is a market-based approach to control pollution. Governments set an overall limit (cap) on emissions, issuing permits accordingly. Companies can trade these permits, incentivizing lower emissions. This system encourages efficiency as businesses innovate to reduce emissions, providing financial benefits to those emitting less and meeting environmental targets. See also Climate Change, Climate damages, Emissions, Emission targets._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Easwaran Narassimhan on Emissions Trading - Dictionary of Arguments
Narassimhan I 968 Emissions Trading/Emissions Trading System/ETS/Carbon Pricing Mechanisms/Narassimhan: Carbon pricing mechanisms fall into three main categories: cap-and-trade (i.e. emissions trading systems (ETS)), carbon taxation or hybrid mechanisms that combine elements of both. >Emissions Trading/Fankhauser. An ETS establishes a cap either on total emissions or on emissions intensity, as measured by emissions per unit of gross domestic product (GDP). An ETS may include emissions from all GHGs [greenhouse gases] or just some, such as CO2. Governments then provide allowances in the primary market, typically for free or through an auction, equal to the level of the cap (Aldy & Stavins, 2012)(2) (Cf. >Cap-and-Trade Systems/Aldy/Stavins). A hybrid approach of partial auctioning and free allocation of some emission allowances is common in ETS markets. Firms may then trade allowances during a specified compliance period, after which they are surrendered to the government. Firms with lower abatement costs are expected to sell their allowances to firms with higher abatement costs in the secondary market, and overall, emissions reductions are theoretically achieved at least cost. Key design considerations for an ETS include determining which GHGs and which sectors will be regulated under the cap; at what point of regulation emissions will be regulated (upstream or downstream); the stringency of the cap (or the total allowable emissions); costs of abatement, compliance and ETS administration; method of allowance allocation and distribution; monitoring, reporting and verification (MRV) of emissions and allowances; and impacts on international competitiveness (PMR and ICAP, 2016(3); Schmalensee & Stavins, 2017)(4). Additional considerations include policies that provide system flexibility such as banking credits for future compliance and borrowing credits from future compliance periods, creation of an allowance reserve to stabilize secondary market prices and ensure liquidity, creation of new trading registries to monitor and track carbon allowance markets, accounting for carbon offsets, international linkage, revenue management and stakeholder engagement (PMR and ICAP, 2016(3); Schmalensee & Stavins, 2017)(4). >Emission permits, >Emission reduction credits, >Emission targets, >Emissions, >Emissions trading, >Climate change, >Climate damage, >Energy policy, >Clean Energy Standards, >Climate data, >Climate history, >Climate justice, >Climate periods, >Climate targets, >Climate impact research, >Carbon price, >Carbon price coordination, >Carbon price strategies, >Carbon tax, >Carbon tax strategies. 1. World Bank. (2016). State and trends of carbon pricing 2016. Washington, DC: Author. 2. Aldy, J. E., & Stavins, R. N. (2012). The promise and problems of pricing carbon: Theory and experience. The Journal of Environment & Development, 21(2), 152–180. 3. PMR & ICAP. (2016). Emissions trading in practice: A handbook on design and implementation. Washington, DC: Partnership on Market Readiness (PMR), International Carbon Action Partnership (ICAP), and World Bank. 4. Schmalensee, R., & Stavins, R. N. (2017). The design of environmental markets: What have we learned from experience with cap and trade? Oxford Review of Economic Policy, 33(4), 572–588. Easwaran Narassimhan, Kelly S. Gallagher, Stefan Koester & Julio Rivera Alejo, 2018: “Carbon pricing in practice: a review of existing emissions trading systems”. In: CLIMATE POLICY, Vol. 18/8, pp. 967–991._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Narassimhan I Easwaran Narassimhan Carbon pricing in practice: a review of existing emissions trading systems 2018 |
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