Global Spotlight Report #75: Emission Trading Systems: Lessons Learned


For post 75 we asked our Country Managers to share their country’s experience developing and implementing emission trading systems (ETS). We asked them to describe the type of ETS system their country uses or is developing. Is it based on carbon pricing? What industries does it cover? What geographical areas/regions?

Country Managers also were asked to indicate if their country’s emission trading system has been successful in reducing emissions and/or the price of carbon? What lessons have been learned in how to design and implement such a system?

From the information our Country Managers provided, we identified the following lessons learned for countries interested in improving the management of their own emission trading systems:

  • Cap Stringency: The success of an ETS in reducing emissions hinges on how stringent the cap is. A cap that is too lenient might not result in significant emissions reductions.
  • Market Dynamics: The supply and demand for carbon credits can influence the price of carbon. If allowances are too plentiful, the price might be too low to incentivize reduction efforts.
  • Regulatory Oversight: Effective monitoring, reporting, and verification are crucial to prevent fraud and ensure compliance.
  • Economic Context: The broader economic context, including oil prices and industrial activity, can affect the performance of an ETS.

Table A below provides a highlight of each country’s emissions trading system. Complete Country reports follow.

Country Emissions Trading System Focus
  • The only country to have implemented and repealed an emissions trading system
  • Bill to establish a new ETS is pending with the legislature
  • The Greenhouse Gas Pollution Pricing Act
  • China’s New ETS is Not Yet Fully Rolled Out
European Union
  • The World’s First Large-Scale ETC Carbon Market
  • National Steering Committee to Put in Place a New ETS
  • Indonesia’s Carbon Trading System May not Be Able to Deter Companies from Reducing Emissions
  • Italy Has a Cap and Trade System Based on the EU’s ETS
  • Waiting for the Results of a Pilot ETS
  • Nigeria’s New ETS Holds Promise in Driving Sustainable Development and Combating Climate Change
Saudi Arabia
  • The Greenhouse Gas Crediting and Offsetting Mechanism
South Africa
  • Has a Voluntary Carbon Emissions Trading In Place
  • The Mandated ETS has been one of Spain’s Main Emission Reduction Drivers
  • Turkey Takes a First Step with a Monitoring-Verifying-Reporting System
United Kingdom
  • ETS Needs Supportive Market Policies to Make it Work
United States
  • US Makes Use of Cap-and-Trade and Cap-and-Invest Programs

Country Reports

Australia is the Only Country to Have Implemented and Repealed an Emission Trading Scheme

Australia is the only nation that has implemented and repealed a carbon emission trading scheme. This reversal was a direct result of what has been termed Australia’s ‘climate wars’ – a saga of political strife and partisanship surrounding the Carbon Pollution Reduction Scheme (CPRS). The rise and fall of Australia’s Carbon Pollution Reduction Scheme Then,…

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Brazil’s New Emissions Trading System – Expectations versus Reality

The carbon market is a reality but must still be legally established in Brazil. Bill 182/2024 should create the Brazilian Emissions Trading System and pave this path.Expectation The proposed model is based on a tool adopted in some of the world’s leading economies, a reference for its ability to stimulate reductions in a country’s emissions….

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Lessons Learned from Canada’s Emission Trading Systems

Canada has a carbon pricing system to recognize the cost of pollution. It makes it more expensive to use fossil fuels; the more you pollute, the more you pay. Carbon pricing is recognized globally as the most efficient means to reduce greenhouse gas emissions. It works because when fossil fuels cost more, people use less…

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China’s Emissions Trading System May Hold the Key to Carbon Peaking Once Rolled Out Fully

China today owns the world’s most extensive Emissions Trading System (ETS), with 5.1 billion metric tons of CO2 emissions covered annually. To date, China’s ETS includes more than 2,200 companies in China’s power sector. The first stage includes only power sector companies, but the scheme will ultimately include over 6,000 production companies from different industries….

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European Union: The World’s First Large-Scale ETS Carbon Market

The EU Emissions Trading System (ETS) was launched in 2005 and was the world’s first international emissions trading system. It operates throughout all EU Member States, Norway, Iceland, and Liechtenstein, and has been broken into phases that include increasingly more restrictive carbon policies. The EU ETS is currently in phase 4, which spans from 2021…

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Lessons Learned from India’s Emissions Trading Systems

India recently established a National Steering Committee (NSC) to put in place a mechanism that would establish an indigenous emissions trading system (ETS). An ETS, or a cap-and-trade system, is a policy instrument designed to price carbon, incentivizing companies to reduce emissions. Jurisdictions managing an ETS limit or cap the total amount of GHG (greenhouse…

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Indonesia’s Carbon Trading System May Not be Able to Deter Companies from Reducing Emissions

Indonesia launched its first carbon emissions trading market in September 2023. The market allows businesses and financial institutions to offset emissions while supporting carbon reduction projects. Under the scheme, corporations that exceed their carbon quotas can purchase carbon credits from industries that emit pollution below a government-set limit or from renewable power plants. Over-emitting businesses…

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Italy Has a Cap and Trade System Based on the EU ETS

The EU Emissions Trading System (EU ETS) is a strategy developed by the European Union to efficiently reduce greenhouse gas emissions, representing one of the primary climate-change policies of the EU. Operating across 31 countries in Europe, the scheme was adopted in 2005, and it regulates emissions from over 10,000 energy-intensive installations, including combustion and…

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Mexico is Waiting for the Results of a Pilot ETS

Mexico is a valuable case study in developing an Emissions Trading System (ETS) for a middle-income nation. While a full-fledged program isn’t operational yet, the pilot program offers insights into potential benefits and challenges. By building on these lessons and addressing future considerations, Mexico can potentially establish a successful ETS that promotes cost-effective emission reductions…

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Nigeria’s New ETS Holds Promise in Driving Sustainable Development and Combating Climate Change

In Nigeria’s pursuit of sustainable development and climate action, the federal government, in collaboration with and support of the Africa Carbon Market Initiative (ACMI), aims to tap into the country’s carbon market, estimated at a value of $2.5 billion. This initiative marks a significant step towards environmental stewardship and economic growth.The Intergovernmental Committee on Carbon…

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Greenhouse Gas Crediting and Offsetting Mechanism (GCON) in Saudi Arabia

Saudi Arabia is working on developing a carbon trading market by creating carbon credits that companies can buy to offset their emissions.In October 2023, Saudi Arabia announced at the United Nations MENA Climate Week in Riyadh that it will launch in early 2024 the Kingdom’s Greenhouse Gas Crediting and Offsetting Mechanism (GCOM) “to incentivize the…

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The Development of Voluntary Carbon Emissions Trading Systems in South Africa

  Fig 1: Carbon Emissions Trading System  Structure (A possible market structure is shown above with a nine-step process from project implementation to using the tax offset.)There are several planned or ongoing voluntary carbon offset systems in South Africa: They allow companies to mitigate their financial liability regarding the proposed carbon tax. Emission Carbon Tax…

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The Mandated Emission Trading Systems Market has been One of Spain’s Main Drivers of Emissions Reduction

Currently, there are two complementary carbon emissions trading systems in Spain: the mandatory regulated market and the voluntary market. They are very different; their only similarity is that they auction the same thing: one ton of carbon equivalent (tCO₂e), with significant divergences in their objectives and operation. Undoubtedly, the mandatory regulated market has been the…

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Turkey Takes the First Step with a Monitoring-Verifying-Reporting System

An Emission Trading System is of considerable significance because of the environmental and economic advantages it offers, such as; Carbon Emission Reduction: It facilitates emissions reduction by implementing measures to control carbon emissions. Reducing emission limits incentivizes businesses to invest in greener technologies. Economic Benefits: Companies can buy and sell within the carbon market while…

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UK’s ETS Will Demonstrate Its Ability to Impact Emissions if Appropriate Future Market Policies are Put in Place

The UK Emissions Trading Scheme (UK ETS) replaced the UK’s participation in the European Union Emissions Trading Scheme (EU ETS) on 1 January 2021. Phase 1 runs between 2021 – 2025 and  2 from 2026 – 2030. The initial cap for the UK ETS in 2021 was 156 million allowances (covering only a quarter of UK…

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The US Makes Use of Cap-and-Trade and Cap-and-Invest Programs

Only thirteen states have adopted an emissions trading system in the United States. Eleven states in the northeast (Connecticut, Maine, Delaware, Massachusetts, Maryland, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont) are part of the Regional Greenhouse Gas Initiative (RGGI), which is a cap-and-trade program. California also has a cap-and-trade program, while…

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