Good COP, Bad COP

Sectoral approaches
by -- December 10th, 2009

Some emitters suggest sector-specific cap-and-trade regulations.

Today I attended a presentation suggesting a separate cap-and-trade system for the cement industry. (About 8% of world CO2 emissions come from manufacturing, transporting, and curing cement.)

Sectoral approaches have some advantages, including allowing trading across countries (if it’s an international system) and giving policymakers control over specific sector impacts. Sectors with high abatement costs are particularly interested in a sectoral approach because it keeps them from having to purchase emissions permits from low abatement cost sectors.

However, prohibiting trading across sectors lowers the economy’s compliance flexibility and results in increased total compliance costs. Further, analysis from Harvard’s Belfer Center suggests that a sectoral approach may be no simpler than an economy-wide cap-and-trade.

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