Documents on Emissions Trading

The objective of the work on emission trading is to develop a practical implementation framework, or options, for an international greenhouse gas emission trading system.

Emissions Trading: Trends and Prospects (December 2007)
By Julia Reinaud and Cédric Philibert (IEA)
Emissions trading schemes are developing or being proposed in several regions and countries. While some have designed their schemes and defined rules (e.g. EU ETS, North Eastern US States, Japan, Norway), others have not yet finalised their options (e.g. Australia, Canada, New Zealand). Schemes already in operation also provide for adjustments in design as lessons are drawn from implementation. When deciding which design options best address the countries’ emission levels, policy makers must account for national circumstances. Hence, the developing schemes differ in their size, scope, target, allocation mode, etc.  This paper provides the latest developments of announced, proposed and existing greenhouse gas emissions trading schemes (ETS) around the world since 2006.  It also examines different potential design options for ETS (e.g. coverage, allocation mode, provision for offsets), and how these options are treated in the existing, announced or proposed schemes.

Linking Greenhouse Gas Emission Trading Systems and Markets (October 2006)
By Jane Ellis and Dennis Tirpak (OECD)
Several different emission trading schemes (ETS) are currently operating, and a number of other national and sub-national schemes are likely to emerge in the near future. These ETS have different sizes, design characteristics and geographical/sectoral scopes. There are currently only a few links between different emissions trading schemes and markets. However, there are no conceptual reasons why links between emission trading systems and markets cannot be expanded. This paper outlines key characteristics of current and proposed ET schemes and assesses current, or possible pre-2012, links between them.

New Commitment Options: Compatibility with Emissions Trading (November 2005)
By Cédric Philibert (IEA)
This paper considers different options for quantitative greenhouse gas emission commitments from the standpoint of their technical compatibility with emissions trading. These are dynamic targets, binding targets with price caps, non-binding targets, sector-wide targets/mechanisms, action targets, allowances and endowments, and long-term permits. This paper considers these options from the standpoint of their compatibility with emissions trading. It does not discuss their other merits and demerits, for example, the effect on greenhouse gas emissions levels.

Linking Project-based Mechanisms with Domestic Greenhouse Gas Emissions Trading Schemes
(June 2004)
By Stephen Bygrave (OECD) and Martina Bosi (International Energy Agency)
Project-based mechanisms can represent cost-effective GHG mitigation possibilities, but they are voluntary and only contribute to increasing the supply of credits. Project-based mechanisms thus need to be linked to another instrument that recognises the project credits towards compliance with a GHG objective - such as an emissions trading scheme. Linking project-based mechanisms and domestic emissions trading schemes is economically desirable as it typically expands coverage of gases and sources, increases compliance options, increases market liquidity and lowers compliance costs of meeting environmental goals. However, environmental and economic issues and concerns may arise when considering such linking. This paper shows that these concerns can be addressed though implementing different accounting and compliance management solutions. The paper also examines how some issues associated with linking GHG emissions trading and project-based mechanisms are being dealt with in the EU's "Linking Directive". The paper discusses the EU Linking Directive rules and their implications on the emissions market as well as administrative and accounting requirements.

Linking non-EU Domestic Emissions Trading Schemes with the EU Emissions Trading Schemes (June 2004)
By William Blyth and Martina Bosi (International Energy Agency)
Linking the domestic emissions trading schemes of different countries or regions can have efficiency benefits as a result of increasing the size and fluidity of the market, so that the same environmental benefits can be gained at a lower overall cost, giving economic benefits to both parties.  The paper takes each of the design features of the EU emissions trading scheme, and assesses the implications for countries with schemes of different designs who wish to link to the EU scheme.  The paper concludes that it is possible to link schemes with a wide range of design differences, with perhaps only two aspects causing particular difficulties, namely mutual recognition of trading units and the penalty regime.

Emissions Trading: Taking Stock and Looking Forward (June 2004)
By Cédric Philibert and Julia Reinaud (International Energy Agency)
Both practical experiences and analyses of tradable permit schemes point to emissions trading as a tool to achieve environmental goals most cost-effectively. It might also be key to long-term environmental efficacy, and equitable repartition of efforts. In future, emissions trading might be the centrepiece of international efforts to mitigate climate change. However, abatement costs are and will remain largely uncertain, and fixed and binding targets thus entail unpredictable costs. This paper discusses options to deal with cost uncertainties.

OECD Global Forum on Sustainable Development: Emissions Trading, Paris, 17-18 March 2003
Order the Proceedings: Greenhouse Gas Emissions Trading and Project-based Mechanisms
The aim of the Forum was to bring representatives from OECD and non-OECD country governments together with representatives from the research community, to identify and discuss key policy issues relating to GHG emissions trading and other project based mechanisms for GHG emission reduction, such as Joint Implementation and the Clean Development Mechanism. These mechanisms are of significant interest to both Economies in Transition and developing countries. The scope of the Forum also covered experiences with the use of emission trading in other environmental policy applications, such as reducing conventional air pollutants.