Examinations of national and regional policies and mitigation mechanisms designed to reduce greenhouse gas emissions including market-based mechanisms and command and control legislative frameworks.

Command and control regulations

Environmental direct regulations, also known as command and control policies, refer to laws and regulations on environmental standards. Originally, governments tended to respond to environmental problems by issuing direct regulations, which is the customary way of addressing certain issues in various sectors of government policy. The US led the way in the 1960s during the era of modern environmental regulations. Command and control regulations became popular instruments for dealing with pollution problems and are perhaps the most widely used instruments in environmental policy.

Compliance markets e.g. EU ETS, RGGI, GGas

Economists suggest that environmental regulations are necessary for the industrialised world. Whilst a business pays for its labour, input materials and plant, it does not pay for the amount of pollution it creates. When a business does not pay for utilising a resource, it has only a small incentive to utilise the resource in a reasonable manner.

Compliance markets are those where regulated entities obtain and surrender emissions permits (allowances) or offsets in order to meet predetermined regulatory targets. In the case of cap-and-trade programs, participants – often including both emitters and financial intermediaries – are allowed to trade allowances in order to make a profit from unused allowances or to meet regulatory requirements.

Voluntary markets

The voluntary carbon market encompasses all transactions of carbon offsets that are not purchased with the intention to surrender into an active regulated carbon market. Voluntary demand for carbon offsets is driven by companies and individuals that take responsibility for offsetting their own emissions, known as purely voluntary buyers, as well as entities that purchase pre-compliance offsets before emissions reductions are required by regulation.

Purely voluntary offset buyers are driven by a variety of considerations related to corporate social responsibility, ethics, and reputational or supply chain risk. Pre-compliance buyers speculatively procure offsets before a compliance carbon market start date, hoping to obtain a lower price than what the same offset may eventually fetch in the compliance program.

Readings

1. M. Wilder and L. Fitz-Gerald, 2008, Carbon Markets and Policy in Australia Recent Developments. University of New South Wales Law Journal, Vol. 31, No. 3, 2008: 838–860. Available at http://www.unswlawjournal.unsw.edu.au/sites/default/files/45_wilder_and_fitzgerald_2008.pdf
2. Grubb M., Sato M. and Comberti C. Analyses of the effectiveness of trading in EU-ETS. Available at http://climatestrategies.org/wp-content/uploads/2012/02/cs-effectiveness-of-ets.pdf
3. Raising Ambition: State of the Voluntary Carbon Markets 2016. Available at http://www.forest-trends.org/documents/files/doc_5242.pdf
4. Passey R., MacGill I. and Outhred H. The NSW Greenhouse Gas Reduction Scheme: An analysis of the NGAC Registry for the 2003, 2004 and 2005 Compliance Periods. Available at http://www.ceem.unsw.edu.au/sites/default/files/uploads/publications/CEEM_DP_070827_000.pdf