Designing a prototype emissions trading system for Colombia

Designing a Prototype ETS for Colombia Exec Summary (957 KB) Designing a prototype emissions trading system for Colombia (1.2 MB)

Published: 2019

Authors: Suzi Kerr, Juan-Pablo Montero, Ruben Lubowski, Angela Cadena, Mario Londoño, Adriana Cavallo, Lisa Lafferty, Soffia Alarcon, Oscar Rodriguez, Angela Solanilla, Guillermo Rudas, Luis Ignacio Betancur, Luis Fernando Macías, David Marín, Mauricio Palma, Camila Aguilar, José Farfán

Emissions trading    
may come to Colombia.    
All sectors could join.    

flavia carpio 770955 unsplash colombia lowresThe primary objective of a Colombian ETS would be to support the country to achieve its climate targets as defined in its Nationally Determined Contribution (NDC): a 20 - 30% reduction in GHG emissions compared to the business as usual scenario by 2030. An ETS, like a carbon tax (which could be used at the same time), can also raise revenue. Neither of these pricing policies constitutes a complete climate mitigation policy.

On 27 July 2018, Colombia adopted a climate law, which outlines provisions for the establishment of a National Program of Greenhouse Gas Tradable Emission Quotas. This makes Colombia the second country in Latin America (joining Mexico) to enact legislation for what is likely to become a national Emissions Trading System (ETS). Colombia also already has a carbon tax that covers many fossil fuels and an offset system that can be used instead of paying this tax.

This paper presents a working model for what an ETS could look like in Colombia and was part of a larger project, funded by the World Bank´s Partnership for Market Readiness with support from the Colombian government. While the working model in this paper was designed specifically for Colombia, taking into account its GHG emissions profile and a variety of contextual parameters, many of its design lessons extend to other countries and/or regions. We designed this model with the aim of including all sectors and covering nearly all the country´s emissions.

Citation

Kerr, Suzi, Juan-Pablo Montero, Ruben Lubowski, Angela Cadena, Mario Londoño, Adriana Cavallo, Lisa Lafferty, Soffia Alarcon, Oscar Rodriguez, and Angela Solanilla. 2019. “Designing a prototype emissions trading system for Colombia.” Motu Working Paper 19-06. Motu Economic and Public Policy Research. Wellington, New Zealand.

Funders

World Bank