Carbon markets and taxation

A well-functioning carbon market is likely to be a prominent feature in any future mitigation framework. Under the 1997 Kyoto Protocol, 36 industrialized countries committed to cutting their emissions 5 percent below 1990 levels by 2012. To raise the incentives and lower the costs of achieving those reduction emissions targets, the Protocol broke new ground putting in place three innovative market mechanisms: the clean development mechanism, joint implementation and emissions trading. These mechanisms enable countries to access cost-effective opportunities to reduce emissions, or to remove carbon from the atmosphere, in other countries.

The clean development mechanism allows developed nations to meet emissions reduction targets by funding sustainable development projects in developing countries. It entitles investors in projects that reduce emissions to claim carbon credits, which can be counted towards emissions targets in industrialised countries that are Party to the Protocol. While the cost of limiting emissions varies considerably from region to region, the effect for the atmosphere of limiting emissions is the same, irrespective of where the action is taken. The carbon market is already playing an important role in shifting private investment flows, but will need to be significantly expanded to mobilize the investment and financial flows necessary to address climate change.

Another way to fund mitigation measures or to assist research and development in mitigation technologies is through carbon taxes. These taxes mean that demand for fossil fuels is reduced as compared to more environmentally friendly alternatives. DESA serves the United Nations Committee of Experts on International Cooperation in Tax Matters, a global body of independent tax experts. The Committee may have an important role in this area in future, since cooperation to share successful practices, assist in capacity building on administrative issues, and avoid complications such as double taxation of the same emissions may become increasingly important aspects of the practical application and effectiveness of carbon taxes.

 

Case studies


  • 2006 - Projects to Reduce Emissions (PRE)
    Summary:
    The PRE programme took advantage of the Kyoto Protocol's joint implementation mechanism, encouraging the development of projects by providing a share of New Zealand's Kyoto emissions units, which ...
  • 2006 - Water Charges
    Summary:
    Finland is a land with a surplus of water resources. However, municipal waste waters cause environmental concern, and there has traditionally been little concern for saving water. In order to decrea...
  • 2006 - Australia's Industrial Development Experience
    Summary:
    The 2005 Framework for Industry Policy Development (FIPD is an example of a tool for making industry policy decisions that explicitly considers environmental and social aspects, increases the consiste...
  • 2006 - The Air Pollution Control Programme 2010
    Summary:
    In September 2002, the Finnish Government approved a national programme setting maximum annual limits for emissions of sulphur dioxide, nitrogen oxides, ammonia and volatile organic compounds to be co...
  • 2006 - Taxation of vehicles
    Summary:
    According to a study carried out by the EU Commission, the price elasticity in the demand for private vehicles is 0.1. In the long term, too, the price elasticity in relation to the number of kilometr...
  • 2006 - Green Investment Scheme (GIS)
    Summary:
    The Study has been prepared by the World Bank upon request of the Government of Bulgaria. It examines the various issues surrounding the "Greening of Assign Amount Units (AAUs)" with a view to pro...
  • 2006 - Joint Implementation Capacity Building
    Summary:
    The Joint Implementation Capacity Building project provided assistance to the Ministry of Environment and Waters,(MoEW) on the Bulgarian Climate Change Policy. The Joint Implementation Capacity B...
 

Partnerships


  • Mandatory Disclosure of Automotive Emissions
    Lead Partner:
    Government of Indonesia - Ministry of Environment  
    Geographical Scope:
    Sub-regional ASEAN region 
    Summary:
    Develop a uniformed mandatory disclosure scheme on emissions of motor vehicles to inform the public on compliance with motor vehicle emissions standards within respective ASEAN countries. In order to reduce air pollution caused by automotive emission, the MOE of Republic Indonesia has several experiences with performance program (proper) for in used vehicles. The GOI has also started for the "eco...
  • Energy and Environment Partnership with Central America
    Lead Partner:
    Government of Finland - Ministry for Foreign Affairs - Sistema de la Integracion Centroamericana (SG-SICA)  
    Geographical Scope:
    Sub-regional Central America 
    Summary:
    The main objective of the Partnership is to promote the use of renewable energy sources and clean technologies in Central America in a sustainable manner, and to make energy services more accessible to the poor, particularly to those in rural areas. Increased utilisation of renewable energy in the national and local energy mix, introduction of new energy and environmental technologies, utilisatio...