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The report analyzes the Clean Development Mechanism's (CDM) successes and failures, noting a heavy concentration of projects in China, India, and Brazil, while Africa remains largely sidelined. It argues that current project-based modalities and stringent additionality rules create high transaction costs and barriers for Least Developed Countries (LDCs). The authors propose shifting toward programmatic CDM to support small-scale projects and sectoral CDM to address heavy industry, specifically analyzing the Chinese iron and steel sector. Key recommendations include retiring CERs to ensure global emission reductions and reforming additionality testing to be more pragmatic and inclusive.

The research paper examines the marginal role of Least Developed Countries (LDCs) in the Clean Development Mechanism (CDM) and evaluates whether preferential access to the EU ETS can increase their participation. It finds that such access is insufficient unless underlying barriers—including limited institutional capacity, lack of financing, and high transaction costs—are addressed. The authors use supply-demand scenarios for 2013-2020 and a comparison with the Lomé Conventions in agricultural trade to argue that financial incentives for high-value projects and reduced access costs are more critical than market access alone.

The document examines the criteria for identifying sub-sectors exposed to a significant risk of carbon leakage under EU ETS Phase III. It argues that calculating additional costs without accounting for free allowances is logically inconsistent, as free allocation is intended to mitigate the very leakage it is meant to identify. Using UK data, the author illustrates that a gradual inclusion of sectors as free allocations decline from 80% in 2013 to 30% by 2020 provides better visibility, allows for learning, reduces economic distortions, and maintains incentives for international climate cooperation.

The report projects emissions for the EU, Japan, and other Annex I countries up to 2012 and 2020. It finds that while the EU ETS is likely to have a surplus of allowances up to 2012 at a price of €20/tCO2, the EU-15 and Japan will face overall deficits relative to their Kyoto targets. Conversely, Russia, Ukraine, and new EU member states are projected to have significant emission surpluses. Looking toward 2020, the EU ETS is expected to enter a deficit unless efficiency and renewables targets are met, suggesting a rise in carbon prices post-2012.

The document examines the legislative debate in the US regarding the adoption of a nationwide emissions trading scheme and the use of border adjustment measures to prevent carbon leakage and protect industrial competitiveness. It analyzes specific proposals like the Climate Security Act of 2008, arguing that while such measures are likely to be included in future legislation, they face significant legal risks under WTO rules, particularly the most-favored nation principle. The paper contrasts the US focus on 'competitiveness' and 'free-riding' with the EU's focus on 'carbon leakage' and recommends international coordination to avoid trade wars and ensure that such measures are based on environmental rather than protectionist rationales.

The document analyzes the 'boom and bust' pattern of carbon prices in emissions trading schemes, attributing it to fixed supply facing highly uncertain demand and asymmetric information. It argues that price collapses undermine low-carbon investment and economic efficiency. While rejecting carbon taxation as a viable alternative due to political and implementation hurdles, the author proposes several policy options to stabilize markets, highlighting reserve price auctions in the EU ETS as a feasible, low-complexity mechanism to reduce supply automatically if prices fall too low.

The document analyzes the cement industry's CO2 emissions, which stem from limestone calcination, fuel combustion, and electricity use. It identifies abatement options including energy efficiency, alternative fuels, clinker substitutes, and carbon capture and storage (CCS). The paper examines the economic impact of carbon pricing, noting that high carbon costs can lead to carbon leakage—where production shifts to regions with laxer regulations—due to the industry's capital-intensive nature and the high cost of transportation. It suggests that border carbon adjustments may be more effective than fixed free allocation of allowances in mitigating leakage.

The report argues that Europe can lead a global transition to an eco-efficient economy by synchronising climate, energy, and industrial policies. It examines sector-specific experiences in energy efficiency, district heating, biofuels, renewable electricity, automotive, chemicals, and steel to demonstrate that environmental regulation can drive innovation and competitiveness. The authors propose a strategic agenda focusing on resource systems efficiency, new technology markets, and global carbon pricing, supported by hybrid governance arrangements and a systems-based approach to policy evidence.

The study examines how carbon pricing affects the chemical sector by analyzing individual production processes to identify specific leakage risks. Using Germany as a representative example, it finds that while most chemical sub-sectors face moderate cost increases, certain basic chemicals—such as calcium carbide, chlorine, and soda ash—experience significant cost increases relative to their net production value. The report suggests that for some substances, like chlorine, high transport costs and risks may mitigate leakage, while others may require tailored policy instruments such as conditional free allowances or state aid.

The paper explores using revenues from the sale of Bulgaria's surplus Assigned Amount Units (AAUs) to fund a Green Investment Scheme (GIS). It focuses on bioenergy, arguing that Bulgaria's underutilized biomass resources could support large-scale fuel switching from electricity and oil to wood-based heating. The authors propose a 'programmatic approach' to overcome the high transaction costs that hindered similar projects under Joint Implementation (JI). Financial assessments suggest mitigation costs for municipal building fuel switches could be as low as 12.7 Euro per tonne of CO2 reduced, while household switches would cost between 24.9 and 30.2 Euro per tonne.

The report analyzes Green Investment Schemes (GIS) as a hybrid carbon finance mechanism in Central and Eastern Europe (CEE) that 'greens' surplus Assigned Amount Units (AAUs) by earmarking sales revenues for domestic climate mitigation. It argues that GIS can overcome the failures of the Clean Development Mechanism (CDM) and Joint Implementation (JI)—particularly in energy efficiency and small-scale projects—by utilizing more flexible, programmatic architectures and simplified monitoring and verification (M&V). The report identifies the thermal retrofitting of old building stock as a high-priority target area due to its long-term climate impact and significant social co-benefits. It provides specific architectural recommendations, such as the use of sectoral baselines, post-2012 crediting periods, and the dominance of 'hard greening' to ensure environmental integrity.

The report assesses Green Investment Schemes (GIS) as a carbon finance mechanism to unlock surplus Assigned Amount Units (AAUs) in Central and Eastern Europe (CEE). It argues that GIS can overcome the failures of the Clean Development Mechanism (CDM) and Joint Implementation (JI) by targeting high-priority, long-term mitigation areas such as building energy efficiency and bioenergy. The authors recommend using programmatic approaches, simplified monitoring and verification (M&V), and extending crediting periods beyond 2012 to ensure the bankability of infrastructure projects. The report estimates the potential value of transacted AAUs at approximately €9 billion and highlights the importance of additionality to maintain environmental integrity.

The report critiques REDD as a flawed approach that focuses on reducing rather than stopping deforestation, potentially rewarding polluters through carbon offsetting. It highlights significant risks to Indigenous Peoples' land rights, the danger of replacing natural forests with carbon-poor plantations, and methodological failures such as 'leakage'. The author argues that market-based funding is volatile and inequitable, suggesting instead that funding should be grant-based, managed by the UN, and focused on addressing the underlying drivers of deforestation.

The document presents a portfolio of 2008 research by Climate Strategies, focusing on the EU ETS, the Clean Development Mechanism (CDM), and G8 climate opportunities. Key analyses include the risks of carbon leakage in industrial sectors, the underperformance of CDM projects in terms of certified emission reductions, and the economic rationale for transitioning from free allowance allocation to auctioning in the EU ETS. It also includes the Eliasch Review on financing global forests and a study on the development of mandatory emissions trading in Japan.

The report examines the Joint Implementation (JI) mechanism of the Kyoto Protocol, detailing its two operational tracks and comparing it to the Clean Development Mechanism (CDM). It highlights significant delays in implementation, particularly in Russia and Ukraine, and the restrictive impact of the EU Emissions Trading Scheme (EU ETS) on projects in Central and Eastern Europe. The document also analyzes the role of Green Investment Schemes (GIS) as an alternative to JI and concludes that the mechanism's late start and short crediting period (ending in 2012) threaten its overall viability unless post-2012 certainty is established.

The document examines the economic rationale for auctioning emissions allowances in the EU ETS, arguing that free allocation distorts carbon price signals and creates windfall profits. It suggests that auctioning provides a more transparent framework for low-carbon investment and generates public revenue to support poor households and innovation. While acknowledging carbon leakage as a concern, the report asserts it affects only a narrow range of sectors and can be addressed through targeted State Aid or border adjustments rather than broad free allocation. For the power sector, the report finds no serious leakage concerns and recommends full auctioning. It proposes a simple auction design using single-round, sealed-bid auctions with a uniform market-clearing price.

The paper argues that international aviation and maritime emissions must be regulated as separate sectors to avoid emissions leakage and economic inefficiency. It proposes the implementation of global emissions trading or fee regimes, noting that such systems could generate significant revenue for climate mitigation and adaptation in developing countries. The author evaluates linking options, concluding that a unilateral link with the Clean Development Mechanism (CDM) is the most practical first step due to ease of implementation and allowance supply, while bilateral links (such as with the EU ETS) are more complex, requiring international treaties and scheme compatibility. The document also discusses the International Maritime Emission Reduction Scheme (IMERS) as a differentiated approach to shipping emissions.

The report identifies a small number of German industrial sectors—specifically basic iron and steel, fertilizers and nitrogen compounds, aluminium and aluminium products, paper and paperboard, and other basic inorganic chemicals—that face both high carbon-related costs and high international trade intensity. It argues that these sectors are most susceptible to competitiveness distortions and carbon leakage. The analysis distinguishes between direct costs (emissions from production) and indirect costs (increased electricity prices), noting that for some sectors, indirect costs are the primary burden. The document also evaluates various policy mechanisms to mitigate these effects, such as free allocation of allowances, border tax adjustments, and sectoral agreements.

The report finds that CDM projects frequently underperform, with only 76% of forecasted CERs actually issued by June 2007. This underperformance is attributed to overestimations by consultants and validators, as well as implementation and monitoring difficulties. Waste projects are the worst performers, while N2O projects often exceed expectations. The study identifies additionality demonstration as the primary cause of project rejection, particularly for large-scale projects and cement blending activities in India and Brazil. Bilateral projects, especially those with European participants, show higher CER issuance rates than unilateral projects. The report also highlights deficiencies in stakeholder consultation and the lack of quantifiable indicators for sustainable development in host countries like China, India, and Brazil.

The document analyzes four scenarios for an international carbon market: global trading, formal linking of domestic ETS, indirect linking via credits, and a mixed approach. It focuses on the formal linking of the EU ETS with emerging systems in the US (RGGI, California), New Zealand, and Australia. The authors argue that for linking to be effective and environmentally sound, partners should share similar levels of ambition and strategic climate goals, such as the EU's 2°C target. The report identifies price caps, differing levels of ambition, and the treatment of Assigned Amount Units (AAUs) as primary barriers to linking. It proposes the creation of an international clearinghouse to coordinate regulation and suggests a 'no-regret' working program for the International Carbon Action Partnership (ICAP) focusing on the harmonization of registries, monitoring, reporting, and verification (MRV) standards, and allocation procedures.