Emission Trading as a Tool for Environmental Management

Although there is continuing progress in the use of ET for environmental management, there is no clear direction that one can establish in terms of its future. Directional change occurs as different models are implemented and evaluated under changing technological and cultural circumstances. If the emphasis will be on international emission trading or CDM, a thorough review of past Joint Implementation efforts should be undertaken. There is no doubt that lessons gained can shape up the trading system. If the focus is to be on domestic trading of selected emissions, then capacity building and further pilot trading should be pursued. The promotion of ET for environmental management is consistent with the broad development strategies adopted by many developing countries in protecting the environment. It is important that the governments provide policy support through studies that assess experiences in ET and identify the positive and negative aspects of implementation, and assist in capacity building in terms of training programs, human resource development, and institutional strengthening. It is also important to promote regional cooperation by exploring potential for CDM and related activities of various international protocols. * Senior Economist, Energy Division (East), Asian Development Bank, Manila, Philippines. ** Independent Consultant. Introduction Emission trading (ET) is a market-based policy tool, which can be used for environmental management. ET refers to the ability of sources of pollution to buy or sell the rights to release emissions. Buying and selling these rights will allow sources to achieve compliance with legal obligations and meet a regulatory standard. Market-based instruments (MBIs), including ET, have a number of advantages over traditional regulatory methods. MBIs give those responsible for creating pollution an