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Emissions Trading in Practice: a Handbook on Design and Implementation EMISSIONS TRADING IN PRACTICE A EMISSIONS TRADING IN PRACTICE: A HANDBOOK ON DESIGN AND IMPLEMENTATION © 2016 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16 This work is a joint product of the staff of The World Bank and adelphi, representing the International Carbon Action Partnership (ICAP), with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent, nor of ICAP and its members. The World Bank and adelphi do not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank nor ICAP concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http://creativecommons.org/ licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: Partnership for Market Readiness (PMR) and International Carbon Action Partnership (ICAP). 2016. Emissions Trading in Practice: a Handbook on Design and Implementation. World Bank, Washington, DC. License: Creative Commons Attribution CC BY 3.0 IGO Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. Adaptations—If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank. Third-party content—The World Bank does not necessarily own each component of the content contained within the work. The World Bank therefore does not warrant that the use of any third-party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to the Publishing and Knowledge Division, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: [email protected]. Design: Corporate Visions, Inc. EMISSIONS TRADING IN PRACTICE: A HANDBOOK ON DESIGN AND IMPLEMENTATION In collaboration with: Motu II EMISSIONS TRADING IN PRACTICE ACKNOWLEDGMENTS This Handbook was prepared jointly by a team of experts from Motu Climate Economics – I4CE), Danira Baigunakova (Alexander von Economic and Public Policy Research and Environmental Defense Humboldt Foundation), Juan Carlos Belausteguigoitia (Centro Mario Fund, with significant contribution from Vivid Economics. Molina), Nicolas Bianco (EDF), Hendrik (Derik) Broekhoff (Stockholm Environment Institute), Chris Bush (Energy Innovation), Yong-Sung Suzi Kerr and Ruben Lubowski led the teams from Motu Economic Cho (Korea University), Suh-Yong Chung (Korea University), Brent and Public Policy Research and Environmental Defense Fund, respec- Cloete (DNA Economics), Brett Cohen (The Green House), Frank tively, which also consisted of Catherine Leining and Leah Murphy Convery (EDF), Margaret Cress (EDF), Antoine Dechezleprêtre (Motu) and Gernot Wagner and Katherine Rittenhouse (EDF). The (London School of Economics), Kristin Eberhard (Sightline Institute), Vivid Economics team was led by John Ward, and also included Cor Zeren Erik Yasar (Turkey), Carolyn Fischer (Resources for the Future), Marijs and Paul Sammon. Hubert Fallmann (Umweltbundesamt), Dirk Forrister (IETA), Meredith Michael Mehling (Massachusetts Institute of Technology), Felix Fowlie (University of California, Berkeley), Alexander Golub (EDF Matthes (Öko-Institut), and Duan Maosheng (Tsinghua University) and American University), Quentin Grafton (Australian National edited the Handbook, and also devoted their time and expertise to University), Sonia Hamel (Hamel Environmental Consulting), Anthea provide project guidance. Harris (Victorian Government, Australia), Takashi Hongo (Mitsui Global Strategic Studies), Max Horstink (SouthSouthNorth), Yu-Shim Pierre Guigon (World Bank), Constanze Haug and William Acworth Jeong (Korean Foundation for Quality, Republic of Korea), Cui Jing (ICAP Secretariat) provided substantive inputs and managed the (Baosteel), Nathaniel Keohane (EDF), Seong-il Kim (Seoul National project. University), Yong-Gun Kim (Korea Environment Institute), Xavier Labandeira (University of Vigo), Sang Youp Lee (Korea Environment We also wish to acknowledge the following contributing authors: Rob Institute), Franz Litz (Great Plains Institute), Andreas Löschel Fowler (Essential Change Advisory Services), Jürg Füssler (INFRAS), (University of Muenster), Diptiranjan Mahapatra (Adani Institute Alex Hanafi (EDF), Tang Jin (SinoCarbon), Joojin Kim (EDF), Joshua of Infrastructure Management), Claudio Marcantonini (European Margolis (EDF), Clayton Munnings (Resources for the Future), University Institute), Andrei Marcu (Centre for European Policy Juan-Pablo Montero (Pontificia Universidad Católica de Chile), Erica Studies), Ralf Martin (London School of Economics), Brian Murray Morehouse (EDF), Annie Petsonk (EDF), and Luca Taschini (London (Duke University), Michael O’Brien (EDF), Hyungna Oh (Kyung Hee School of Economics). University), Robert Parkhurst (EDF), Billy Pizer (Duke University), We sincerely thank representatives from ETS jurisdictions who Misato Sato (London School of Economics), Jonathan Schrag (EDF), shared their practical insights and knowledge related to designing PR Shukla (Indian Institute of Management), Thomas Sterner (EDF, and implementing ETS through meetings, interviews, and review Collège de France and University of Gothenburg), Jan-Willem van of the Handbook. These include John Storey-Bishoff (Alberta); de Ven (European Bank for Reconstruction and Development), Stacy Nicole Steinweg (Australia); Edie Chang, Mary-Jane Coombs, Sean VanDeveer (University of New Hampshire), Derek Walker (EDF), Donovan, Jason Gray, Ray Olsson, Rajinder Sahota and Mark Wenzel Bryony Worthington (EDF), Libo Wu (Fudan University), Matthew (California); Wang Shu (China); Maja Dittel, Johannes Enzmann, Zaragoza-Watkins (EDF), Xiliang Zhang (Tsinghua University). Hana Huzjak and Dalwon Kim (European Commission); Matti Kahra We wish to thank the following for research assistance: Margaret (Finland); Cécile Goubet, Yue Dong, Maxime Durande, Anais Maillet Cress, Rafael Grillo, Michael O’Brien, and Nicolas Taconet (EDF, USA) and Dimitar Nikov (France); Maria Martin (Ireland); Giulia Dramis and Iurii Banshchikov (ICAP Secretariat). We wish to thank the follow- (Italy); Gulmira Sergazina (Kazakhstan); Hyungsup Lee (Korea); ing for additional editorial assistance: Anna Brinsmade, Daniel Francis, William Lamkin and Will Space (Massachusetts); Erik van Andel Dana Miller, and Elizabeth Petykowski (EDF), Stephanie Gleissner and (the Netherlands); Lois New (New York); Peter Gorman, Amelia Charlotte Unger (ICAP Secretariat), and Inge Pakulski. Guy-Meakin, Ted Jamieson, Eva Murray, Matt Paterson, Kate Ryan and Nigel Searles (New Zealand); Dag Svarstad (Norway); Jonathan We thank our colleagues from the World Bank Group and the ICAP Beaulieu, Jean-Yves Benoit and Claude Côté (Québec); Hanna-Mari Secretariat who reviewed the report and provided helpful input and Ahonen (Sweden); Laurence Mortier, Reto Schafer and Sophie feedback: Adrien de Bassompierre, Pauline Maree Kennedy, Tom Wenger (Switzerland); Masahiro Kimura, Sachiko Nakamura and Yuko Kerr, Michael McCormick, Maja Murisic, Grzegorz Peszko, and Bianca Nishida (Tokyo); Ben Rattenbury (United Kingdom); and represen- Ingrid Sylvester (World Bank), and Alexander Eden, Michel Frerk, Aki tatives of the German Federal Ministry for the Environment, Nature Kachi, Lina Li, Marissa Santikarn, Camille Serre, Kateryna Stelmakh, Conservation, Building, and Nuclear Safety (BMUB), the German and Kristian Wilkening (ICAP Secretariat). ICAP staff also provided Emissions Trading Authority (DEHSt) and the Spanish Office of Climate significant research input and illustrations. Change. ICAP would also like to thank the BMUB for their financial contribu- We wish to acknowledge additional input and peer review provided tion to this report. by: Soffia Alarcón Diaz (Mexico), Emilie Alberola (Institute for CONTENTS III CONTENTS SYNTHESIS – Emissions Trading:
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