This paper, published by the International Carbon Action Partnership (ICAP), consolidates the empirical evidence of the positive impacts of emissions trading systems (ETS) around the world to date, with theoretical and conceptual arguments in favor of ETS. They are increasingly becoming a key climate policy instrument in a range of jurisdictions around the world. More than a decade has passed since the first ETS for greenhouse gases was established in the European Union – time enough for scientists and academics to investigate whether the benefits of the instrument have been realized in practice. This paper reviews both the theoretical and empirical evidence in support of emissions trading as a climate policy instrument, and outlines a range of arguments in favor of the instrument.
Based on a review of academic literature and official reports, this paper argues that ETS ensures environmental effectiveness, makes economic sense and can also support a broad range of additional policy objectives. Not surprisingly, the paper finds that the evidence base is centered on those systems in Europe and North America that have been implemented the longest, while new and growing systems in Asia are, as yet, underrepresented in the literature. Looking forward, the paper is intended as a live document, to be reviewed and amended as new evidence becomes available.