National Government Interventions in a Global Arena
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Edited by Frank Wijen, Kees Zoeteman, Jan Pieters and Paul van Seters
Chapter 25: Trading with Carbon: A Global Response to a Global Challenge
25. Trading with Carbon: A Global Response to a Global Challenge Moritz von Unger and Thiago Chagas SUMMARY Carbon trading is one of the most innovative instruments in modern environmental policy-making. Emissions trading, in its cap-and-trade or offsetting form, attempts to incentivise much-needed greenhouse gas emission reductions by putting in action market instruments to complement other, more conventional forms of environmental regulation. While the market solution faces a range of challenges, the magnitude of resources required for effective climate change mitigation demands the effective and prompt engagement of private capital. Emissions trading is able to achieve this by creating flexibility for cross-sector mitigation activities, triggering transnational cooperation, and tapping into economically efficient emission reductions at a global scale. INTRODUCTION Over the past decade, emissions trading has evolved as one of the pillars of international climate policy, almost 150 billion US dollars (USD) worth in 2009.1 Emissions trading and its most prominent strand, cap-and-trade, lie at the core of the Kyoto Protocol and have inspired dozens of initiatives to put a price on greenhouse gas (GHG) emissions, create carbon rights, and have them traded across borders. At the national and regional levels, cap-and-trade has gained ground with the establishment of the European Union Emissions Trading Scheme (EU ETS), adopted in 2003 and recently extended into its third trading period (2013-2020). The EU ETS is the largest GHG emissions-trading scheme currently in effect and a unique policy experiment. Its strengths 1 World Bank, 2010. 721 M2782 - WIJEN TEXT.indd 721 16/11/2011 11:...
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