April 17, 2011

What to Expect from Sectoral Trading: A U.S.-China Example

by Claire Gavard, Niven Winchester, Henry Jacoby and Sergey Paltsev

- In recent United Nations Framework Convention on Climate Change (UNFCCC) negotiations, sectoral mechanisms were proposed as a way to encourage early action and spur investment in low carbon technologies in developing countries, particularly in the electricity sector. Sectoral trading, which is one such proposition, involves including a sector from one or more nations in an international cap-and-trade system. In order to assess potential impacts from such a mechanism, we analyze trade in carbon permits between the Chinese electricity sector and a U.S. economy-wide cap-and-trade program using the MIT Emissions Prediction and Policy Analysis (EPPA) model.

Gavard, C., N. Winchester, H. Jacoby and S. Paltsev (2011). "What to Expect from Sectoral Trading: A U.S.-China Example." MIT Joint Program Report Series Report No. 193, Feb 2011.