Implementing Effective Emissions Trading Systems

Carbon pricing is a valuable instrument in the policy toolkit to promote clean energy transitions. By internalising the societal cost of greenhouse gas emissions, carbon pricing can stimulate investments in low-carbon technological innovations, foster multilateral co-operation and create synergies between energy and climate policies. Emissions trading systems offer one possible design for carbon pricing schemes. Where emissions are capped, trading systems create certainty about the allowed emissions trajectory, while allowing carbon prices to fluctuate. Emissions trading systems create incentives to reduce emissions where these are most cost-effective. Sub-national, national and supranational jurisdictions have shown increasing interest in emissions trading systems as a policy instrument to achieve climate change mitigation goals. By analysing international experiences, this report draws lessons for designing and implementing effective, efficient emissions trading systems. The report covers structures, policies and objectives across the energy sector, elaborating key lessons and questions especially for jurisdictions interested in developing new emissions trading systems. This report identifies key energy-related challenges drawn from “real world” experiences, opening the doors for a deeper examination of technical issues and lesson-sharing.