Publication: Emissions Trading in Practice, Second Edition: A Handbook on Design and Implementation
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2021-04
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2021-04-09
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Currently, about 46 national jurisdictions and 35 cities, states, and regions, representing almost a quarter of global greenhouse gas (GHG) emissions, are putting a price on carbon as a central component of their efforts to reduce emissions and place their growth trajectory on a more sustainable footing. An increasing number of these jurisdictions are approaching carbon pricing through the design and implementation of Emissions Trading Systems (ETS). As of 2021, ETSs were operating across four continents in 38 countries, 18 states or provinces, and six cities covering over 40 percent of global gross domestic product (GDP), and additional systems are under development. This handbook sets out a 10-step process for designing and implementing an ETS. These steps are interdependent, and the choices made at each step will have important repercussions for decisions in the other steps. In practice the process of ETS design will be iterative rather than linear. The need to adjust and adapt policies over time is reflected in the update of this handbook, which was first released in 2016. New insights, approaches, and designs have proliferated adjusting the way ETSs operate and further developing our understanding of them.
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“Partnership for Market Readiness; International Carbon Action Partnership. 2021. Emissions Trading in Practice, Second Edition: A Handbook on Design and Implementation. © World Bank. http://hdl.handle.net/10986/35413 License: CC BY 3.0 IGO.”
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Publication Emissions Trading in Practice(World Bank, Washington, DC, 2016-03-07)Note: this version of the Handbook has been superseded. The updated Second Edition of the Handbook can be downloaded at the link below ("Associated URLs"). As the world moves on from the climate agreement negotiated in Paris, attention is turning from the identification of emissions reduction trajectories—in the form of Nationally Determined Contributions (NDCs)—to crucial questions about how these emissions reductions are to be delivered and reported within the future international accounting framework. The experience to date shows that, if well designed, emissions trading systems (ETS) can be an effective, credible, and transparent tool for helping to achieve low-cost emissions reductions in ways that mobilize private sector actors, attract investment, and encourage international cooperation. However, to maximize effectiveness, any ETS needs to be designed in a way that is appropriate to its context. This Handbook is intended to help decision makers, policy practitioners, and stakeholders achieve this goal. It explains the rationale for an ETS, and sets out a 10-step process for designing an ETS – each step involves a series of decisions or actions that will shape major features of the policy. In doing so, it draws both on conceptual analysis and on some of the most important practical lessons learned to date from implementing ETSs around the world, including from the European Union, several provinces and cities in China, California and Québec, the Northeastern United States, Alberta, New Zealand, Kazakhstan, the Republic of Korea, Tokyo, and Saitama.Publication Lessons Learned from Linking Emissions Trading Systems(World Bank, Washington, DC, 2014-02)In support of the partnership for market readiness work on helping the emergence of credible, consistent, and compatible market-based infrastructure across countries, this report reviews the lessons learned from linking greenhouse gas emissions trading systems. Two emissions trading systems (ETS) are linked if a participant in one system can use a compliance instrument (allowance or credit) issued by the administrator of either system for compliance. This report focuses on links that enable participants of both ETS to use compliance instruments from either system (bilateral links). The linked systems can adopt common compliance instruments. Or each system can retain its own compliance instruments and accept those from either ETS for compliance, possibly subject to restrictions. A bilateral link offers three potential benefits. First, it can make an ETS a viable policy option for a jurisdiction where an independent ETS will be infeasible for technical or cost reasons. Second, a bilateral link can reduce the total cost of achieving the combined emissions caps of the linked ETS. Third, a bilateral link can enhance the operation of the market for the compliance instrument(s). Section one gives background information. Section two presents the types of links an ETS can establish and discusses the potential benefits and risks of linking. The requirements for a bilateral link between two ETS are summarized in section three. How to implement a bilateral link is discussed in section four.Publication Domestic Emissions Trading(World Bank, Washington, DC, 2012-04)This document provides an overview and summary assessment of lessons and insights learned from various existing and presented domestic cap and trade schemes. For each scheme, a set of general characteristics (or issues) is considered. The characteristics (or issues) covered include the following: (i) coverage and scope; (ii) setting a cap; (iii) setting the points of obligation; (iv) allocation of allowances; (v) systems for domestic monitoring, reporting and verification, (MRV) and compliance; (vi) enabling trading and fostering stability; (vii) institutional arrangements, including technical and legal infrastructures; and (viii) use of offsets and linking. The domestic emissions trading schemes (ETS) included in this assessment are the following: (i) European Union (EU) ETS; (ii) New Zealand (NZ) ETS; (iii) United States (U.S.) northeast states regional greenhouse gas initiative (RGGI); (iv) California (Cal) ETS; (v) Australia clean energy future carbon pricing mechanism (Aus CPM); and (vi) Tokyo cap and trade program (C and T).Publication Governance of Emissions Trading Systems(World Bank, Washington, DC, 2022)Emissions trading continues to expand as a flexible policy response to climate change. Its implementation raises complex governance challenges, however, and calls for robust institutional, regulatory and procedural frameworks. Unlike aspects of technical design and implementation, the governance of emissions trading systems (ETSs) has found less extensive treatment in the available knowledge base. However, existing systems offer valuable insights into the successful governance of emissions trading from the initial establishment and routine operation of an ETS to the review of its performance and the management of change. This report draws on such experiences to provide guidance on the governance of an ETS across all stages of its evolution.Publication Emissions Trading Registries(World Bank, Washington, DC, 2016-10)The issues around the environmental integrity of international market mechanisms have gained a great deal of attention in the wake of the Paris Agreement. In addition, with the agreement on market-based measures for international aviation being reached, these issues are likely to gain even more prominence in countries’ efforts to prepare for the implementation of international market mechanisms. In a context where inaccurate accounting is one of the environmental integrity risks associated with market mechanisms, an emissions trading registry is critical for avoiding “double counting”—the situation where a single GHG emission reduction or removal is used more than once to demonstrate compliance with mitigation targets. An emissions trading registry is an online database that issues, records, and tracks the carbon units that are exchanged within market mechanisms or financed through Results-Based Climate Finance programs. Given the length of time and capacity needed for the development of a registry, it is essential for countries that are in the process of designing market mechanisms to factor in specific regulatory, administrative, functional, and technical aspects of registry development. Against this backdrop, and to further facilitate future registry design and implementation, this report provides policy makers and other stakeholders with technical insights and guidance on how to support country-specific decision making and activities related to registry development.
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