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Are emissions best regulated by market-based mechanisms – why/why not? Group 3

Are emissions best regulated by market-based mechanisms – why/why not? Group 3. Introduction . Definition of market-based mechanisms Background of Kyoto Protocol Law and economic theory Clean air act 1990 Examples of market-based mechanisms in the Kyoto protocol .

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Are emissions best regulated by market-based mechanisms – why/why not? Group 3

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  1. Are emissions best regulated by market-based mechanisms – why/why not?Group 3

  2. Introduction Definition of market-based mechanisms Background of Kyoto Protocol Law and economic theory Clean air act 1990 Examples of market-based mechanisms in the Kyoto protocol

  3. Various types of Market-based Mechanisms Two main types of market-based instruments… Instruments influencing prices Taxes – increase the price of the product. Financial incentives reduce the price Determines maximum cost  incentive to reduce emissions at a lower cost than the tax rate No caps Longevity – can be adjusted overtime Low compliance cost

  4. Various types of Market-based Mechanisms 2. Instruments influencing quantities Maximum quantity is set in absolute terms or per unit of output. Greenhouse gas emissions trading scheme Emit fewer pollutants than you are allowed  ability to sell unused quotas Emit more pollutants than you are allowed  must buy quotas

  5. Various types of Market-based Mechanisms Present use of market-based mechanisms The EU is already encouraging Member States to use market-based instruments The Water Framework Directive –requires Member States to introduce water pricing to encourage efficient water use. Taxing landfill - helps to promote recycling Air pollution – utilising the use of emission quota trading to control atmospheric pollutants. - Directive 2001/81/EC Market-based instruments for packaging according to the impact of the products and waste, to promote more sustainable consumption.

  6. Various types of Market-based Mechanisms Market-based mechanisms More suitable than regulatory approaches Open-ended and provide an ongoing profit incentive for companies and individuals to reduce emissions Create additional profits and/or additional tax reductions. Encourages companies not to take the minimum action necessary to meet set standards

  7. Advantages of trading mechanisms for reducing emissions Efficiency Flexibility Predictability of outcome Innovation Competition and Coordination

  8. Dis-advantages of trading mechanisms for reducing emissions Is emission trading efficient? Uncertainty Complexity Enforcement

  9. Conclusion • Final polluters • Necessity • Environmental resources as commodities • Not perfect solution • Future

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