7.6.6.3 International Co-operative Mechanisms
Mitigation costs vary across countries with different resource endowments,
economic structure and development, institutional structure, and various other
factors. These cost differences provide the opportunity to create and capture
the gains from exchange that arise through international co-operative flexibility
mechanisms. Mechanisms such as international carbon trading can facilitate collaborative
emission reductions across countries and regions, and thereby minimize global
control costs (see Chapter 6 for a detailed discussion
on the issues involved in establishing such mechanisms).
The assumptions on international co-operative mechanisms include:
- Sectors and GHGs, which are included in the mechanisms.
- Specific constraints on countries and regions included in the trading regimes.
- Specific constraints on different co-operative mechanisms like those established
by the Kyoto Protocol. The Protocol includes two project-based mechanisms:
Article 6 on JI and Article 12 on CDM. Both JI and CDM aim to establish exchange
institutions for projects to reduce GHG emissions. JI projects are between
Annex I countries of the UNFCCC, and CDM projects are between countries with
a reduction commitment specified in the Kyoto Protocol (termed Annex B countries)
and countries without such a commitment. Another mechanism of the Kyoto Protocol
is Article 17 that facilitates emissions trading among Annex B countries.
- Boundaries on GHG emissions trading markets, for example that set the minimum
amount of domestic emission reductions for developed countries, specify a
relationship between domestic GHG emissions reduction efforts and the GHG
emissions reduction they can implement in collaboration with international
partners.
Mitigation costs usually fall with greater flexibility for international emissions
trading. This suggests that constraints on trading increase the costs of any
emission target. Some critics point out that this argument does not address
the potential positive impacts on technological development that can arise from
implementing GHG emissions reduction policies domestically in developed countries,
such as incentives for innovation and R&D.
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