Economics Dictionary of Arguments

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Stavins I 159
Emission-Reduction-Credit Systems/ERC/Aldy/Stavins: An emission-reduction-credit (ERC) system delivers emission mitigation by awarding tradable credits for “certified” reductions. Generally, firms that are not covered by some set of regulations—be they command-and-control or market-based — may voluntarily participate in such systems, which serve as a source of credits that entities facing compliance obligations under the regulations may use. Individual countries can implement an ERC system without having a corresponding cap-and-trade program.
A firm earns credits for projects that reduce emissions relative to a hypothetical “no project” baseline. In determining the number of credits to grant a firm for a project, calculation of the appropriate baseline is therefore as important as measuring emissions.
VsEmission-Reduction-Credit: Dealing with this unobserved and fundamentally unobservable hypothetical baseline is at the heart of the so-called “additionality” problem.
While ERC systems can be self-standing, as in the case of the CDM [Clean Development Mechanism], governments can also establish them as elements of domestic cap-and-trade or other regulatory systems. These ERC systems—often referred to as offset programs—serve as a source of credits that can be used by regulated entities to meet compliance obligations under the primary system. >Carbon Pricing/Stavins.


Robert N. Stavins & Joseph E. Aldy, 2012: “The Promise and Problems of Pricing Carbon: Theory and
Experience”. In: Journal of Environment & Development, Vol. 21/2, pp. 152–180.


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Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution.
The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.

Stavins I
Robert N. Stavins
Joseph E. Aldy
The Promise and Problems of Pricing Carbon: Theory and Experience 2012


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