Carbon markets

Countries are exploring innovative and cost-effective ways to reduce their greenhouse gas emissions and to accelerate investment into the deployment of low carbon technologies. Market-based policies are a proven way to achieve these aims by pricing carbon into private sector decision-making. In order to achieve the scale of necessary investment, we need to move away from project-based approaches such as the Clean Development Mechanism (CDM) to measures with national or regional coverage like emissions trading systems (ETS), sectoral crediting mechanisms and carbon taxes.

Valuable lessons can be learned from experience in designing and implementing existing market-based policies. By adapting best practice to local priorities, circumstances and economic structures, we can help ensure that new market mechanisms meet national objectives for emissions reduction, resource efficiency, energy security and sustainable growth.

Ricardo Energy & Environment’s experts have a proven track record of designing and implementing robust carbon market mechanisms in industrialised and developing countries to achieve environmental and economic progress. Our work brings together expertise on policy design, capacity building and technical expertise in industrial emissions abatement, renewable energy deployment, climate finance, measurement, reporting and verification, and inventory design. Please download our capability statement.

Our services
Our carbon market services include:

  • Scheme design, including sector and greenhouse gas coverage, choice of regulated entity, interactions with existing policies and enforcement regimes.
  • Cap and target setting, underpinned by technical analysis of sectoral abatement potential.
  • Allowance distribution options including developing benchmarks and approaches to auctioning.
  • Analysis of impact of linking systems and use of offset credits, including price impact, harmonisation and price stability mechanisms.
  • Developing complementary mechanisms to support development and deployment of clean technologies.
  • Assessing carbon leakage and competitiveness impacts.
  • Developing measurement, reporting and verification (MRV) frameworks and guidance.
  • Building emissions inventories and registries.
  • Training and capacity building including design of institutions needed for implementation and operation.

 

Our experience
Examples of our work in this field include:

  • Design and implementation of the UK Climate Change Agreements – based on sectoral targets for emission reductions in energy intensive industries - including target setting and MRV framework.
  • Developing benchmarks for free allowance allocation the EU ETS for the European Commission for industrial sectors (iron, steel, coke, glass, chemicals, etc).
  • Study on reform of the CDM drawing lessons for new market mechanisms, including approaches to standardised baselines, additionality and governance.
  • Designing a clean technology accelerator for the EU ETS for the EC, aimed at encouraging emissions technology innovation and green growth.
  • Developing options for linking EU ETS with third party trading systems, including registry accounting mechanisms.
  • Assessment of market readiness (with Tsinghua University) for Chinese pilot emissions trading schemes in Guangdong, Hubei and Chongqing.
  • Follow-on work examining the issues related to linking China’s pilot schemes.
  • Feasibility study on white certificate (energy efficiency) trading in China for the World Bank, including interactions with carbon pricing and renewable energy certificates.

 

China - Energy Efficiency for World Bank
Ricardo Energy & Environment’s experts carried out a study on energy efficiency trading in China for the World Bank, including interactions with carbon pricing and renewable energy certificates. Drawing on international experience, we provided recommendations concerning policy objectives, scheme interactions, and examples of institutional arrangements and target setting approaches.