A comparative analysis of city-based emission trading schemes: key design and management factors for environmental cost effectiveness

Abstract

With more than half the world’s population living in urban areas, cities have become a major source of local and global atmospheric pollution. Originally developed in the 1990s to decrease local pollution, Local Emission Trading Schemes (ETSs) are now emerging as a promising cost-efficient instrument to achieve local GHG emissions reductions. This paper compares four existing city-based ETS covering both local pollutants and greenhouse gases. It identifies common and distinguishing features and assesses the environmental and economic performance of the various existing ETS. Based on this analysis, this paper highlights the factors contributing to the success of local ETS and makes recommendations for future implementation. Finally, this paper underlines that in order to improve the effectiveness of market incentives, the legal nature of tradable credits must be well defined and that overlaps between local ETS and other regulations must be limited.