IPCC Fourth Assessment Report: Climate Change 2007
Climate Change 2007: Working Group III: Mitigation of Climate Change

13.1.1 Types of policies, measures, instruments and co-operative arrangements

A variety of policies, measures, instruments and approaches are available to national governments to limit the emission of GHGs; these include regulations and standards, taxes and charges, tradable permits, voluntary agreements (VAs), informational instruments, subsidies and incentives, research and development and trade and development assistance. Box 13.1 provides a brief definition of each instrument (Hahn, 2001; Sterner, 2003). Depending on the legal framework within which each individual country must operate, these may be implemented at the national level, sub-national level or through bi-lateral or multi-lateral arrangements, and they may be either legally binding or voluntary and either fixed or changeable (dynamic).

Box 13.1 Definitions of selected GHGs abatement policy instruments

Note: The instruments defined below to directly control GHG emissions; instruments may also be used to manage activities that indirectly lead to GHG emissions, such as energy consumption.

Regulations and Standards: These specify the abatement technologies (technology standard) or minimum requirements for pollution output (performance standard) that are necessary for reducing emissions.

Taxes and Charges: A levy imposed on each unit of undesirable activity by a source.

Tradable Permits: These are also known as marketable permits or cap-and-trade systems. This instrument establishes a limit on aggregate emissions by specified sources, requires each source to hold permits equal to its actual emissions and allows permits to be traded among sources.

Voluntary Agreements: An agreement between a government authority and one or more private parties with the aim of achieving environmental objectives or improving environmental performance beyond compliance to regulated obligations. Not all VAs are truly voluntary; some include rewards and/or penalties associated with participating in the agreement or achieving the commitments.[1]

Subsidies and Incentives: Direct payments, tax reductions, price supports or the equivalent thereof from a government to an entity for implementing a practice or performing a specified action.

Information Instruments: Required public disclosure of environmentally related information, generally by industry to consumers. These include labelling programmes and rating and certification systems.

Research and Development (R&D): Activities that involve direct government funding and investment aimed at generating innovative approaches to mitigation and/or the physical and social infrastructure to reduce emissions. Examples of these are prizes and incentives for technological advances.

Non-Climate Policies: Other policies not specifically directed at emissions reduction but which may have significant climate-related effects.