A Critical Overview
Chapter 3: Design variants of emissions trading
Emissions trading systems (ETSs) and their design variants have been subject to considerable research. The literature in this area is rich with studies comparing the various types of system. This observation seems to corroborate the fact that academics are very much intrigued by the special situations in which one emissions trading system comes out on top of another system or vice versa - in other words, under which circumstances one system is to be preferred over another. Academic typologies and findings, however, appear to have limited practical impact on emissions trading designers. It appears that the research interests of academics are sometimes too far removed from the policy considerations and trade-offs faced by policy makers. This chapter, therefore, does not follow the conventional academic approach by starting from the literature and describing the generic emissions trading models that exist. It rather follows the problems encountered by ETS designers: after all, the problems that policy makers are required to deal with are even more complex than the design choices normally considered by academics. The natural drawback of this approach is that it cannot provide clear guidance to policy makers of what they should or should not do. The reason is straightforward: policy advice must be given for the particular context in which the system will operate and given the nature of the various policy objectives.
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