International Review of Environmental and Resource Economics > Vol 10 > Issue 3-4

Lessons Learned in Mandatory Carbon Market Development

Brianne Riehl, Research Group on Evaluating Forestry Contributions to the Carbon Market, Faculty of Forestry, University of British Columbia, Canada V6T 1Z4, Guangyu Wang, Research Group on Evaluating Forestry Contributions to the Carbon Market, Faculty of Forestry, University of British Columbia, Canada V6T 1Z4, Sarah Eshpeter, Research Group on Evaluating Forestry Contributions to the Carbon Market, Faculty of Forestry, University of British Columbia, Canada V6T 1Z4, Helen Zhang, Research Group on Evaluating Forestry Contributions to the Carbon Market, Faculty of Forestry, University of British Columbia, Canada V6T 1Z4, John L. Innes, Research Group on Evaluating Forestry Contributions to the Carbon Market, Faculty of Forestry, University of British Columbia, Canada V6T 1Z4, Nuyun Li, China Green Carbon Foundation, PR China, Jinliang Li, Research Group on Evaluating Forestry Contributions to the Carbon Market, Faculty of Forestry, University of British Columbia, Canada V6T 1Z4 AND China Green Carbon Foundation, PR China, John O. Niles, The Carbon Institute, University of California, USA
 
Suggested Citation
Brianne Riehl, Guangyu Wang, Sarah Eshpeter, Helen Zhang, John L. Innes, Nuyun Li, Jinliang Li and John O. Niles (2017), "Lessons Learned in Mandatory Carbon Market Development", International Review of Environmental and Resource Economics: Vol. 10: No. 3-4, pp 227-268. http://dx.doi.org/10.1561/101.00000087

Publication Date: 16 Aug 2017
© 2017 B. Riehl et al.
 
Subjects
Environmental Economics,  Environmental Economics:Climate Change,  Environmental Economics:Market-based Policy Instruments,  Public Economics:Environmental Taxation,  Environmental politics,  International relations,  Collective action,  Climate Change,  Forestry
 
Keywords
Q52
Climate change, international market, emission trading systems, carbon market, carbon pricing, cap-and-trade.
 

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In this article:
1 Introduction 
2 Global Status and Development Trends of Carbon Markets 
3 Issues and Challenges in ETS Design 
4 Issues and Challenges in ETS Regulation 
5 Issues and Challenges in International Linkage 
6 Lessons Learned and Recommendations 
7 Conclusion 
References 

Abstract

The Kyoto Protocol introduced the notion of a global emissions trading scheme (ETS) to aid in meeting global emissions reduction targets. Since then, the share of emissions covered by carbon pricing has tripled and now encompasses approximately 12% of global emissions. This paper discusses the challenges in design and implementation of past and current ETSs to provide recommendations for ETS development and linkage. It summarizes seven major factors that should be considered for successful ETS implementation: cap setting, permit allocation, trading guidelines that avoid carbon leakage, regulation of offsets, high compliance, transparent and continuous monitoring, and careful collaboration between systems. Successes and failures in practical implementation of each factor are explored through various ETS case studies. If applied carefully, these factors could ensure high and consistent carbon prices, and coupled with strict regulations, could achieve an ETS that meets intended environmental benefits, while offering potential for bottom-up international linkage.

DOI:10.1561/101.00000087