Designing an Emissions Trading System to Achieve the COP 21 Goals

USC Professor and Institute Academic Director Dan Mazmanian, together with other USC faculty members, are leading a clean energy research collaboration with the Hertie School of Governance in Berlin, Germany, and Tsinghua University in Beijing, China, that focuses on the policies and economics of transitioning to clean energy as well as meeting the goals laid out at COP 21.

USC Professor and Schwarzenegger Institute Faculty Fellow Adam Rose just released a white paper co-authored with professors Dan Wei, Noah Miller and Christian Flachsland arguing that G20 countries should lead the way in designing and participating in a global greenhouse gas (GHGs) emissions allowance trading system that will provide financing to developing countries so that they can meet their COP21 commitments.

The authors argue that low and middle-income (LMI) countries made substantial pledges at COP 21 to mitigate and sequester GHGs but they only have a limited capacity to do so in terms of financing the bold approaches needed to meet these goals. Their paper looks at emissions trading as a policy instrument that has great promise for implementing the mitigation and sequestration of GHGs and references the European Union and California as leaders in the field. The paper recognizes that careful institutional design will be required to manage a global cap and trade systems, as many unilateral institutional changes (e.g. adjustment of caps) will affect all other participants in the trading system.

The paper goes on to examine how a stepwise approach of linking or harmonizing existing domestic cap and trade system and other policies could offer a realistic route to building a globally harmonized mitigation policy regime minimizing costs and ensuring fair burden-sharing across countries over time.