Using market-based incentives to curtail greenhouse gas emissions: Factors to consider in the design of the clean development mechanism, joint implementation and emissions trading

This article explores the use of market-based economic incentives in helping to achieve an environmental objective. It focuses on the flexibility mechanisms set out in the Kyoto Protocol, the details of which are the subject of intense negotiation by the Parties, particularly in recent months. It is inevitable that some of the key parameters will change as a result of the agreements reached at the most recently concluded COP 6 meeting at Bonn, Germany and the COP 7 round of negotiations scheduled for Marrakesch in October 2001. However, the basic analysis of the issues discussed will afford the reader a more informed basis upon which to evaluate the role of these incentives in the light of whatever regime is ultimately adopted to reduce greenhouse gas emissions under the UNFCCC. In addition, such analysis can provide insights useful for developing flexibility mechanisms in the domestic and regional contexts.