International Experience with Emissions Trading

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Drawing on the experiences with emissions trading in Europe, North America and the Asia Pacific region, this paper identifies international practices that have emerged from the design and implementation of emissions trading systems to date. Important design features are highlighted, such as the coverage and scope of the system, the distribution of allowances to covered entities, and the management of allowance prices in the market. The paper then proceeds to highlight lessons from the operation of emissions trading systems in practice, focusing on the insights garnered under the European Union Emissions Trading System (EU ETS). Both widely discussed experiences – such as excess allocation and the effects of mostly free allowance distribution in the early phases – as well as more recent challenges, including the debate about carbon price levels and means to address excess supply, are covered, with a focus on empirical observations as opposed to theoretical assumptions. Finally, the paper concludes with a survey of efforts to assess the performance and impacts of the EU ETS, and attempts to define a set of methodologies for the assessment of emissions trading systems more generally.

Author: Tim Laing & Michael Mehling
Year: 2013
Type: Final paper
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