On-line version ISSN 2413-3051
J. energy South. Afr. vol.22 n.1 Cape Town 2011
Emily TylerI; Michelle du ToitII; Zelda BurchellIII
IClimate Change Economist, Cape Town
IIClimate Change Practice Genesis Analytics, SouthSouthNorth Projects Africa
IIIWSP Environment & Energy
Emissions trading is fast becoming one of the most popular policy instruments for reducing greenhouse gas emissions internationally. This hybrid instrument combines the certainty of mitigation volume delivered by regulation, whilst also harnessing the power of the market through an economic approach to deliver migitation price discovery and least cost mitigation opportunities. Theoretically, this is a powerful combination.
However, the realities of uncertainty and lack of information result in international emissions trading experience deviating substantially from the instrument's theoretical potential. This is of particular relevance in a developing country context. Scheme design is therefore very important to counter these market failures, and policymakers are required to strike a balance between this and introducing distortions. Given that the instrument is in its infancy, performance of the various schemes up and running internationally is inconclusive. Emissions trading proponents argue that the benefits will be realised over time, once the initial teething problems are overcome.
The paper is the result of research conducted in 2008 and presented at the South African Climate Policy Summit in 2009. It considers theory and international experience in application to the potential establishment of an emissions trading scheme in South Africa. Lack of data, capacity and experience with markets in the energy sector present complications in the use of the instrument as a central part of the nation's mitigation policy suite, as do market concentration issues. Should an emissions trading be proposed, the paper argues for ways in which its design could address these complications, and align with the current energy security imperative resulting from the electricity crisis in the country, the twin political objectives of poverty reduction and employment creation of the recently elected government, and the timeframes proposed by the Long Term Mitigation Scenarios.
Keywords: emissions trading, emissions trading scheme, greenhouse gas mitigation, Long-term Mitigation Scenarios
Full text available only in pdf format.
This paper, derived from a report, is the result of collaboration between the Energy Research Centre (ERC), Environmental Policy Research Unit (EPRU) and Genesis Analytics. The ERC and EPRU are both research units at the University of Cape Town. The research by Genesis Analytics was commissioned by the ERC, drawing on National Research Foundation (NRF) funding which is gratefully acknowledged.
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Received 16 March 2009
Revised 23 February 2011