Emissions Trading, Pricing and Transfers
Flexible, market-based approaches to reducing air pollution have a strong track record in lowering emissions and offer an important tool to do so cost-effectively. Since its inception, CCAP has educated policy makers around the world on the pros and cons of different market-based approaches and played a key role in designing workable cap-and-trade solutions.
At its inception, CCAP helped design and pushed for inclusion of the market-based Acid Rain Trading Program as part of the U.S. 1990 Clean Air Act Amendments. A few years later CCAP undertook economic analysis and built a coalition that paved the way to development of a rigorous and flexible regional NOx control program.
In the international arena, CCAP provided advice on the development of the Kyoto Protocol’s Clean Development Mechanism (CDM) and other flexibility mechanisms, and served as lead designer on a team for the European Commission that helped define the European Union Emission Trading System (EU ETS) and the associated monitoring, reporting and verification guidelines that were established to help meet Europe’s compliance obligations under the Protocol. When the need for reform of Europe’s system became clear, we provided critical analysis of reforms needed to strengthen it, similar to the modifications the European Commission would later propose.
CCAP’s sector analyses and support for trading system design in California helped shape the state’s AB32 mitigation goals and multi-sector California Greenhouse Gas Cap-and-Trade Program. CCAP helped China’s Hubei province prepare for implementation of its ETS and continues to support trading system design at the state level in the U.S.
The Paris Agreement and Internationally Transferred Mitigation Outcomes (ITMOs)
The 2015 Paris Agreement and accompanying decisions, which provide for Internationally Transferred Mitigation Outcomes (ITMOs), establish a new context for the international use of market-based instruments. CCAP is analyzing the opportunities and risks posed by the use of ITMOs and working with key stakeholders to establish a shared of understanding of how these new instruments can be an effective part of the suite of tools countries have at their disposal to address the challenge of climate change.
What CCAP is Doing with Market-Based Instruments
- Providing input into the United Nations Framework Convention on Climate Change (UNFCCC) negotiations to guide ITMO-related discussions.
- Producing analytical products that identify priority issues and consider the role of ITMOs in meeting countries Nationally Determined Contributions (NDCs)
- Convening stakeholders to socialize best practices in design of instruments that involve transfers of mitigation outcomes.
- Supporting partner institutions in efforts to design effective, Paris-compliant ITMO strategies to help achieve their goals.
CCAP welcomes opportunities to engage with interested parties on these issues.