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Overview of the role of Market Mechanisms Climate Change and Sustainable Development Delhi 07 - 08 April 2006 Edwin Aalders Manager IETA The Objectives of Market Mechanism • To provide an effective mechanism that results in emission reductions at a least cost option. The alternatives to Market Mechanism • • • Taxation – • Receivables spend on procurement programmes to obtain Kyoto Units • Able to direct resource to Sustainable Development Subsidies – • Stimulating technologies with lower emission (green energy – NL) • Subsidies can direct itself to technologies that focus on Sustainable Development Both option normally result in relative higher costs to the overall programme / society The advantages to Market Mechanism • • • Bring together potential users and sellers in an environment that both can gain from the interaction Allows & Drives innovation and cost reductions Creates competition The disadvantages of the Market Mechanism • • • • Allocation always results in winners & losers Can be complex • Auction • Burden sharing Sustainable development not always clearly addressed in the line with expectations (HFC 23 versus renewable energy) Economic of Scale disadvantaged against small scale projects Example of Market Mechanism • • • • • • • US NOx & SOx programme European Union Emission Trading System UK Emission Trading System New South Wales California Climate Action Registry Chicago Climate Exchange Japanese Emission Trading System For more Information International Emissions Trading Association www.ieta.org Edwin Aalders [email protected] www.carbonexpo.com