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International Emissions Trading Rules as a Compliance Tool: What is Necessary, Effective and Workable?

October 2000

Citation: ELR 10837

Author: Robert N. Nordhaus, Kyle W. Danish, Richard H. Rosenzweig, and Britt Speyer Fleming

Governments are currently negotiating rules to govern international greenhouse gas (GHG) emissions trading under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC).1 Emissions trading is a critical element of climate policy because it can allow countries to implement emissions limitation commitments at a significantly lower cost than if such commitments had to be implemented solely from mitigation activities within each country's own borders. Emissions trading thus can promote compliance with the Protocol's emission limitation and reduction commitments; it helps prevent "overemitting."

However, in connection with negotiations on the Protocol, a number of governments and nongovernmental organizations (NGOs) have raised concerns that the inclusion of a trading program provides additional opportunity and incentives for noncompliance in the form of "overselling." "Overselling" will occur if a country that is a party to the Protocol sells allowances that the country ultimately will need to cover its emissions and thus will be unable to meet its emission limitation or reduction commitment.

Robert Nordhaus is a member of the Washington, D.C., law firm of Van Ness Feldman, P.C.; J.D., Yale Law School (1963); B.A., Stanford University (1960). Kyle W. Danish is an associate at Van Ness Feldman; J.D., Temple University School of Law (1997); M.P.A., Princeton University Woodrow Wilson School of Public and International Affairs (1996); B.A., Haverford College (1989). Richard H. Rosenzweig is a principal at Van Ness Feldman; M.A., American University (1984); B.A., Northeastern University (1982). Britt Speyer Fleming is an associate at Van Ness Feldman; J.D., American University Washington College of Law (1997); B.A., Dartmouth College (1994). The authors extend their gratitude to the following individuals for their helpful comments: Christian Albrecht, Carlton Bartels, Timothy Denne, A. Denny Ellerman, Joseph Goffman, Erik Haites, Dale Heydlauff, Fanny Missfeldt, Jake Werksman, Jonathan Wiener, and Thomas Wilson. Responsibility for any errors or omissions rests solely with the authors. EPRI provided financial support for work on this Article. The Article, however, does not necessarily reflect the views of EPRI or its funders.

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