International Emissions Trading & Global Climate Change: Impacts on the Costs of Greenhouse Gas Mitigation

Foreword      ii

Executive Summary     iii

I. Introduction   1

II. The Gains from Trade   2

A. An Illustration   3
B. Numerical Example of the Gains from Trade   5

III. Modeling Analysis of Carbon Trading     9

A. No Trade Scenario   12
B. Annex | Trading   15
C. World Trading   16

IV. Comparison Among Models of Carbon Trading   19

A. Models Used   20
B. Gains from Trade by Buyers and Sellers of Permits   22
C. Effects on Non-Participants and Leakage   25
D. The Initial Allocation of Permits   27
E. Other Key Sensitivities   28

V. Some Institutional Issues in Carbon Trading   31

A. Compatibility of Control Regimes with Trading   31
B. Restrictions on Permit Availability and Permit Demand   32
C. International Transfer Payments   33
D. Monitoring, Reporting, and Certification Costs   35
E. Liability, Accountability, and Enforceability   37

VI. Conclusions   38

Endnotes   40