New World Bank-ICAP Handbook: How to Design Effective Emissions Trading Systems

(ZURICH/ WASHINGTON – March 10, 2016)  A well-designed Emissions Trading System can drive down greenhouse gas emissions and help build the ambition to cut more pollution, according to a new Handbook from the World Bank’s Partnership for Market Readiness (PMR) and the International Carbon Action Partnership (ICAP).

Emissions Trading in Practice: a Handbook on Design and Implementation was co-authored by a team from Environmental Defense Fund (EDF) and New Zealand-based Motu Economic and Public Policy Research, with contributions from Vivid Economics in the UK and over 100 international experts and practitioners. EDF is recognized as a global leader in analyzing and advocating for Emissions Trading Systems (ETSs), in which a cap on emissions guarantees environmental results. Emissions trading also creates a market for carbon allowances that helps companies innovate to meet, or come in under, their allocated limit.

“Emissions trading is based on the simple idea that the market can be a powerful tool for fighting climate change,” EDF’s Chief Natural Resource Economist Ruben Lubowski said. “Well-designed emissions trading systems can channel business decisions and private investment to drive technology development and the other socioeconomic transformations that will support more ambitious climate action. Tools like this will be especially important in light of the Paris climate agreement. This handbook will help empower any country, state or jurisdiction to develop its own system that is appropriate to its circumstances, and contribute to the growing momentum around climate action.”

The new World Bank-ICAP Handbook is the first comprehensive roadmap for designing and implementing carbon markets. Created for nations, states and provinces that are considering or actively working to implement emissions trading systems, the Handbook sets out 10 steps to ETS design, from “Decide the scope” to “Implement, evaluate, and improve.”

“The fundamental concept of emissions trading is as simple as it is powerful,” the Handbook says. “The next decade of emissions trading experience lies in the hands of the decision makers, policy practitioners, and stakeholders who rise to the challenge of developing an ETS in their specific geographic and socioeconomic context.”

The Handbook will be a key resource for the World Bank, which, through its PMR, supports the development of ETSs and other market mechanisms in more than 20 of the largest emerging economies.  ICAP will also use the Handbook to help build capacities for addressing climate change around the world.  The Handbook draws on conceptual analysis as well as lessons learned from emissions trading systems in the European Union; provinces and cities in China, California and Quebec; the northeastern United States (Regional Greenhouse Gas Initiative); Alberta; Australia; New Zealand; Kazakhstan; the Republic of Korea; Tokyo; and Saitama (Prefecture in Japan).

Find Emissions Trading in Practice: A Handbook on Design and Implementation online at: https://openknowledge.worldbank.org/handle/10986/23874.