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Cap and trade gains global momentum ahead of COP 22 climate conference


There’s a global momentum for carbon pricing, says the European Commission, with the number of schemes more than tripling since 2012 and with China, Ontario and Mexico set to launch their cap-and-trade systems in upcoming months. But more than a decade of emissions trading in Europe paints a complex, problem-ridden picture of politics and market failure.

The European Union’s 11-year-old emissions trading system (ETS), the world’s first and largest international cap-and-trade scheme, has served as an exemplary tale of both successes and failures for all new systems, including the one in China set to launch in early 2017.

“The EU and China have been working together and sharing experience on market measures for the past five years,” says Anna-Kaisa Itkonen, a spokeswoman for the European Commission. “China is keen … to learn from what the EU has got right and wrong.”

Learning from Europe

Cap and trade, also known as emissions trading, incentivizes reductions by making businesses pay for their emissions — the more they emit, the more they pay. The “cap,” lowered periodically, places a maximum limit on all emissions, and pollution allowances that allow businesses to emit various amounts are then “traded” on the carbon market.

Experts say the EU’s ETS suffers from unambitious reduction targets, an over-allocation of pollution allowances, low carbon prices and a lack of political will to substantially amend the system despite ongoing revisions following COP 21.

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