Carbon Trading: A Review of the Kyoto Mechanisms

Abstract

The three Kyoto flexible mechanisms—emissions trading, the clean development mechanism (CDM), and Joint Implementation (JI)—have always been controversial. Proponents saw the mechanisms as clever tools to ensure environmental outcomes were achieved at least cost. Reducing the costs of compliance, they argued, would make tighter environmental targets possible, and certainly more politically feasible. Detractors have argued that the flexible mechanisms commoditize Earth's atmosphere in a manner that will allow dubious projects and the exchange of “hot air” to substitute for serious engagement on climate change. This chapter reviews the Kyoto flexible mechanisms, which will become fully operative during the period 2008 to 2012. The review assesses their progress and success to date, examines the problems that have emerged, and considers suggestions for future developments in climate policy.