Why emissions trading

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Why emissions trading?
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How cap-and-trade emissions trading works

• Identify emissions to be covered
• Determine cap
• Socially-determined level of abatement
• Issue permits up to that cap
• Allocate or auction
• Require emitters to acquit (surrender) a permit
  for each unit of emissions
• Determine non-compliance regime, and monitor
  compliance
• Allow permits to trade market determines the
  price, which reflects the marginal cost of
  abatement
• Examples EU ETS, US SOx NOx, proposed
  Australian ETS, proposed NZ ETS, Californian ETS,
  RGGI ETS, to be proposed in the US by new
  president

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Lessons learnt from European EU ETS