The textbook economists' model of a tradable permit system cannot usually be applied perfectly at either the domestic or international scale because of the difficulty and/or expense of defining allocations to and monitoring emissions of some groups, as well as for political reasons. It may be impossible to bring these groups fully into a tradeable permit system but it is often possible to find compromise solutions to gain some benefits from trade.
This paper explores this problem in the context of the Joint Implementation mechanism associated with the Kyoto Protocol. This paper starts by outlining the current international rules governing Joint Implementation. We provide a summary of key jargon for those who are unfamiliar with the complex Kyoto language. We then discuss two key international issues that are still unresolved: baseline development and monitoring. We then turn to domestic governance of Joint Implementation and how the private sector might engage in Joint Implementation. At this point we consider how Joint Implementation fits within the suite of Kyoto flexibility mechanisms, why sellers and buyers might choose to engage in each, and how the different mechanisms might interact in the market for tradeable units. We conclude with some thoughts about productive directions for future research.
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Kerr, Suzi and Catherine Leining. 2004. "Joint Implementation in Climate Change Policy," in The International Yearbook of Environmental and Resource Economics 2003/04, Tom Tietenberg and Henk Folmer, Eds.