For over a decade this study followed designs for emissions trading schemes (ETS) that have emerged in response to global warming. An ETS is considered a cost-effective instrument to mitigate pollution (UNFCCC, 2006). Early in this study indications were that several operational ETSs struggled to achieve their emission reduction goals. Considering this problem, the study looks at the competing constraints of acceptance, effectiveness, and emissions reduction.
The parameters of an ETS can be adjusted in relation to these constraints and the study also considers the alignment of nine design factors to these constraints. The design factors considered are legislation, governance, compliance, rules, compensation, targets, phasing-in, coverage and the distribution of allowances. It emerges that adjustments in terms of factor alignment may affect a schemes ability to reduce emissions.
Other important factors sit outside the scope of this study, i.e. variations in greenhouse gas emissions as a result of the GFC and later COVID-19, also alternative mitigation policies, human adaptation, and innovative technologies.
Viewed in a comparative manner the main case studies are the antecedent US Acid Rain Program (US ARP), the European Union Emission Trading System (EU ETS) and the US Regional Greenhouse Gas Initiative (RGGI). Other ETS designs that provide data for the study include the UK Emissions Trading Scheme (UK ETS), the Carbon Pollution Reduction Scheme (CRPS), which later became known as the Australian Carbon Tax, and the Californian Cap and Trade Program (CCTP).
An effective ETS may perform adequately in relation to its’ goals for governance and compliance, although it can be shown that if the design leans too far toward acceptance the capacity for emissions reduction is diminished. According to the conceptual framework developed early in the study, over time the relationship between the constraints and the design factors should be revised toward reducing emissions.