Greenhouse Gas Emissions Trading

Emissions trading refers to a market-based approach with the goal to achieve greenhouse gas emission reductions at lower costs. In the United National Framework Convention on Climate Change (UNFCCC), which was agreed in 1992, emissions trading was introduced through the concept of Joint Implementation (JI). JI is a collaboration between countries, whereby a country invests in an emission reduction project in another country and receives credits for that in return. The main rationale for JI is that greenhouse gases mix evenly within the atmosphere so that there is no direct link between the location and the impact of greenhouse emissions or emission reductions. Therefore, the effect of actions to reduce greenhouse gas emissions is independent of their location, which implies that cost reductions can be achieved if these actions take place where costs are relatively low.

In the Kyoto Protocol of 1997, the scope was extended from project cooperation among developed countries to collaboration between developed and developing countries, which takes place under the Clean Development Mechanism. An overview of JI and CDM projects can be found at UNEP DTU CDM/JI pipeline.

As part of its efforts to comply with commitments under the Kyoto Protocol, the European Union (EU) decided to set up an emissions trading scheme (ETS), covering around half of the EU economy. The ETS allocates to relatively large greenhouse gas emitting installations in EU Member States (over 12,000) allowances. These allowances maximise an installation's greenhouse gas emissions per year. Should an installation emit fewer gases, then it can sell its surplus in the market. Installations with more emissions than allowed can then buy these allowances in the market. The result is a market which puts a price on emissions of greenhouse gases. Similar schemes have been set up in the USA, such as the Regional Greenhouse Gas Initiative and the Western Climate Coalition.

JIN's work on emissions trading

Since 1995, JIN has done the following activities inthe field of emissions trading:

  • Publication of the Joint Implementation Quarterly, which initially served as a platform for informing policy maker, private sector practitioners and academics about the concept of JI, including the costs, potentials and limitations. Later on, JIQ increasingly focussed on publishing background articles on emissions trading as well as wider climate-related topics.
  • Advice to the Netherlands' government on the modalities and procedures for tender programmes for acquiring carbon credits through JI and CDM projects. 
  • Capacity building support to developing countries on identifying potential projects for the CDM and monitoring their performance within the country contexts.
  • Methodology development, specifically for calculating the reduction of emissions, both for JI and CDM projects and for ETS installations wishing to invest in low-emission technologies or measures.
  • Project development, such as, for instance, a hydropower JI project in Romania and a landfill gas capture project in Slovakia.

For further information, please contact Wytze van der Gaast: