Achieving cost-effectiveness and equity: Analysis of the international emissions trading system

Climate change is one of the greatest environmental challenges facing today's world. The United Nations Framework Convention on Climate Change and the Kyoto Protocol aim at enabling the Parties to mitigate and adapt to climate change, although they recognize that this will be very costly. Therefore, the Kyoto Protocol contains flexibility mechanisms such as international emissions trading, with the goal of enabling the Parties to achieve their targets at the least possible cost. This paper argues that although the international emissions trading system is likely to succeed in creating cost-effectiveness, it does not address issues of equity that arise with climate change and consequently the distribution of its costs and benefits will not be fair to all the Parties. The paper proposes ways through which equity can be incorporated into the climate change regime and more specifically, into the international emissions trading system.