Key elements related to the emissions trading for the Kyoto protocol

The emissions trading first proposed by the US as a concrete idea is a promising policy framework to tackle the global climate change issue. It not only has its high cost efficiency/flexibility but also has big potential as an instrument which is profitable for both buyers and sellers and (must) enforce(s) the compliance with the emission limitations, in principle. It can be the incentives for economy in transition Parties to choose energy-saving economic development path and also for the developing country Parties to join the regime in the following phases. This paper focuses on its pragmatic aspects and clarifies its merits and problems to be solved in order to probe into its possibilities to be installed. Some related trading scheme on environmental issues are discussed to have implications for the climate change case. For climate change trading scheme, concrete proposals are suggested for the emissions budget approach and borrowing. In addition, an idea - packaging carbon taxation and emissions trading - is proposed for the establishment of the domestic emissions market which guarantees the compliance of the Protocol automatically. These elements and proposals are expected to be useful information to clarify the points for the international negotiations with some concrete images, not general ideas. (C) 1995 Elsevier Science Ltd. All rights reserved.