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Overview of the role of Market Mechanisms Climate Change and Sustainable Development

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.

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Overview of the role of Market Mechanisms Climate Change and Sustainable Development

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  1. Overview of the role of Market Mechanisms Climate Change and Sustainable Development Delhi 07 - 08 April 2006 Edwin Aalders Manager IETA

  2. The Objectives of Market Mechanism • To provide an effective mechanism that results in emission reductions at a least cost option.

  3. 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

  4. 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

  5. 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

  6. 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

  7. For more Information International Emissions Trading Association www.ieta.org Edwin Aalders aalders@ieta.org www.carbonexpo.com

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