The objective of the work on emissions trading is to develop a practical implementation framework, or options, for an international greenhouse gas emission trading system. Bookmark this page: www.oecd.org/env/cc/emissiontrading. Link to IEA work on Emissions Trading.
Made to Measure: Options for Emissions Accounting under the UNFCCC (2013)
Andrew Prag (OECD), Christina Hood (IEA) and Pedro Martins Barata (Get2C)
Mitigation pledges put forward by countries under the UNFCCC process are "made to measure" in that they are tailored to fit each country's individual circumstances. However, the pledges also need to be made to be measured so that we have a full understanding of how the various commitments add up to an aggregate global mitigation effort. The Kyoto Protocol provides the only existing international emissions accounting framework, but it applies only to developed countries with specific commitments. This paper assesses what would be required, in addition to existing reporting requirements, to build a robust emissions accounting framework under the UNFCCC applicable to a broad range of Parties. The paper first identifies necessary building blocks for an emissions accounting framework and assesses progress made in agreeing international reporting processes. It then looks in detail at the two most challenging areas for emissions accounting. The first area is accounting for flows of tradable units from market-based mechanisms, including international flows between linked domestic trading systems as well as from offset crediting mechanisms. The second area is accounting for emissions and removals from the forestry and land-use sectors, which have characteristics that make emissions accounting challenging: the need to distinguish anthropogenic emissions from natural variations, to deal with long time-frames and to measure sinks as well as sources of emissions. Finally, options are presented for how these issues might be taken forward in the negotiations, and how negotiators can build on recent progress made on reporting formats.
Making Markets: Unpacking Design and Governance of Carbon Market Mechanisms (2012)
Andrew Prag, Gregory Briner (OECD) and Christina Hood (IEA)
Carbon market mechanisms such as emissions trading systems and crediting mechanisms can have multiple objectives. A key goal is to lower the cost of achieving greenhouse gas (GHG) emissions reductions. Market mechanisms can also catalyse investment in low carbon technologies and practices, provide local environmental and health benefits, contribute to fostering innovation, provide a source of government revenue and facilitate more ambitious mitigation action in future. They can therefore play an important role in the diverse policy toolkit needed to address the global issue of climate change. This paper identifies the key design elements of market mechanisms and examines the governance structures and decision-making processes used to create tradable GHG units in existing systems both inside and outside of the UNFCCC. The analysis explores the potential involvement of international, national and sub-national regulatory bodies in the governance and decision-making processes and the possible role that internationally-agreed standards could play in providing confidence in the quality of GHG units.
Crossing the Threshold: Ambitious Baselines for the UNFCCC New Market-Based Mechanism (2012)
Andrew Prag and Gregory Briner
At COP 17 in Durban, countries defined a new market-based mechanism to promote cost-effective mitigation actions, guided by a set of principles previously agreed at COP 16. These principles include “stimulating mitigation across broad segments of the economy”, “ensuring a net decrease and/or avoidance of global greenhouse gas emissions” and “assisting developed countries to meet part of their mitigation targets”. This paper explores the use of ambitious crediting baselines for groups of emitters as the basis for a new market mechanism that meets the principles listed above. It focuses on how to define groups of emitters and explores different approaches for building ambition into baselines including using emissions projections and performance benchmarks. Potential elements of a process for setting baselines for subsequent international recognition are also presented. The paper builds on extensive previous analyses carried out on emissions baselines for market mechanisms, taking into account recent developments in the international negotiations.
Projecting Emissions Baselines for National Climate Policy: Options for Guidance to Improve Transparency (2012)
Christa Clapp and Andrew Prag (OECD)
Greenhouse gas (GHG) emissions baselines are reference emissions levels. This paper focuses on projected forward-looking baselines that can be used both to inform national climate policy and to set goals that are defined relative to a business-as-usual (BaU) scenario. As some developing countries have defined national mitigation goals for 2020 in this way, the underlying assumptions and methodologies used in setting these emissions baselines are relevant for assessing the magnitude of both the country's expected total emissions reductions and the global aggregate emissions mitigation effort. Currently, there is limited international guidance available on setting national GHG baselines. The resulting variance and lack of transparency makes it difficult to understand emissions pledges defined as relative to BaU, and difficult to compare emissions scenarios across countries. Moving towards international guidance on setting baselines could improve transparency, clarity and comparability, while still allowing countries to maintain diversity in approaches. This paper discusses good practice and presents options for how guidance might be developed for key elements of baseline setting. The options are presented as “tiers” that move from less detailed to more detailed guidance. The first tier describes guidance that would leave maximum flexibility for individual countries, whilst encouraging transparency. The second tier offers more detailed guidance for countries with greater domestic resources and capabilities. Countries could adhere to the tiers according to their capabilities, although they would be encouraged to follow the more detailed approach. The proposed tiers represent different levels of detail, rather than accuracy or data quality. More detailed guidance does not necessarily lead to “better” baselines, though it may help to improve understanding of different baselines.
Keeping Track: Options to Develop International Greenhouse Gas Unit Accounting After 2012 (2011)
Andrew Prag (OECD), André Aasrud and Christina Hood (IEA)
There is still uncertainty surrounding the use of tradable greenhouse gas (GHG) units in a post-2012 international climate change policy framework, despite progress made at the 16th Conference of the Parties (COP 16) in Cancún. In particular, it is not clear whether the current approach under the Kyoto Protocol of allocating centrally-administered emissions allowances for Annex I countries will continue and be built upon, or whether a future system will be based on emission reduction pledges by countries and therefore be less centralised. This paper examines environmental and institutional implications of the use of tradable GHG units under different international accounting scenarios, and explores elements of common ground between scenarios, including lessons from outside the Kyoto Protocol system.
Towards Global Carbon Pricing: Direct and Indirect Linking to Carbon Markets (2010)
Robertus B. Dellink, Stéphanie Jamet, Jean Chateau and Romain Duval
Emissions trading systems (ETS) can play a major role in a cost-effective climate policy framework. Both direct linking of ETSs and indirect linking through a common crediting mechanism can reduce costs of action. We use a global recursive-dynamic computable general equilibrium model to assess the effects of direct and indirect linking of ETS systems across world regions. The analysis in this paper shows, however, that the potential gains to be reaped are so large, that substantial efforts in this domain are warranted.
Emissions Trading: Trends and Prospects (2007)
Julia Reinaud and Cédric Philibert (IEA)
Emissions trading schemes are developing or being proposed in several regions and countries. 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 (2006)
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 (2005)
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 (2004)
Stephen Bygrave (OECD) and Martina Bosi (IEA)
Project-based mechanisms can represent cost-effective GHG mitigation possibilities, but they are voluntary and only contribute to increasing the supply of credits. They 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. The paper examines how some issues associated with linking GHG emissions trading and project-based mechanisms are being dealt with in the EU's "Linking Directive".
Linking non-EU Domestic Emissions Trading Schemes with the EU Emissions Trading Schemes (2004)
William Blyth and Martina Bosi (IEA)
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 (2004)
Cédric Philibert and Julia Reinaud (IEA)
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.
Greenhouse Gas Emissions Trading and Project-based Mechanisms (2004)
This book presents a selection of papers from an international workshop co-sponsored by the OECD and Concerted Action on Tradeable Emissions Permits (CATEP), to discuss key research and policy issues relating to the design and implementation of these instruments. The papers cover the experience of developing and transition countries with greenhouse gas emissions trading and project-based mechanisms. In addition, the papers examine the use of tradeable permits in policy mixes and harmonisation of emissions trading schemes, as well as transition issues relating to greenhouse gas emissions trading markets.
Economics of Climate Change Mitigation
Documents on Project-based Mechanisms (JI & CDM)
Reducing Emissions from Deforestation and Degradation (REDD)
Climate Change Documents by Work Area