Market Mechanisms for Greenhouse Gas Emissions Reduction
AUTHOR: Katerina Rousaki
DATE: August 2001
This report reviews the status of market mechanisms for greenhouse gas (GHG) emissions reduction and studies their impacts on coal. The market mechanisms reviewed are:
- carbon/energy taxes,
- voluntary agreements and
- emissions trading including the project-based mechanisms introduced in the Kyoto protocol (Joint Implementation and the Clean Development Mechanism).
The 1997 Kyoto protocol marked a political decision to take steps to mitigate climate change. The process of agreeing the rules and details of the protocol has been slow and it could take time before the protocol is actually ratified. However, action on a domestic level is already evident in many countries which have introduced their own emission reduction targets and measures in their preparation for the future changes.
The issues of climate change is unlikely to go away from the political agenda and it is expected to impose constraints on GHG emissions particularly in the energy sector. Coal is going to be affected, particularly as it is the most carbon intensive of all fossil fuels. The coal industry needs to follow developments and get involved in the process of shaping the climate change policies to ensure that coal has a role to play.
The report describes market mechanisms and reviews current experience in countries where such mechanisms are operational. Some experience of tax schemes, subsidies, and voluntary agreements is available. Int he case of emissions trading experience is mostly based on pilot schemes. The impacts on coal are investigated, looking into the factors in the design of mechanisms that can affect coal use, the implications and opportunities for clean coal technologies, the coal industry's response and the trends from modelling studies and theoretical analyses.