SECTORAL CREDITING MECHANISMS FOR GREENHOUSE GAS MITIGATION: INSTITUTIONAL AND OPERATIONAL ISSUES

Guiding policy choices requires a systematic comparison of options. In the case of a hypothetical policy instrument, e.g. sectoral crediting, such systematic comparison is difficult as different options may not be strictly comparable. For instance, not all options may be easily applied to a given sector (e.g. an intensity-based crediting may hardly be implemented to a government policy seeking to substitute public transport for personal vehicles); the policy-based SCM may be the only practical option in this case and comparison is therefore moot. Also, not all countries may have the institutional capacity to implement all three options at the same scale. Last, the ability of each option to deliver real reductions hinges on the 'additionality' of the sector's efforts and on the stringency of the baseline. Unfortunately, there is no universally recognised method to define additionality and to determine a baseline. This paper nonetheless offers some insights on how each potential SCM option may fare with respect to the following criteria: Environmental effectiveness: can this option trigger real reductions where implemented?; Addressing competitiveness concerns; Administrative cost and feasibility: how demanding is the mechanism in terms of monitoring, review and, possibly enforcement policy?; Economic efficiency: to what extent does the mechanism lead to the adoption of the least-cost mitigation options in the sector? An initial assessment of each option along these criteria is provided in the conclusion section. This paper explores potential SCMs along several lines. Section 2 draws lessons from existing mechanisms; section 3 considers several dimensions to be considered for baselines; section 4 discusses how SCM could be implemented to provide effective incentives to mitigation; section 5 explores international governance issues. Concluding remarks are presented in section 6.