Cap and trade |
Creates a regulated cap on emission levels and allocates rights to emit to this cap to market participants. Market participants buy and sell emission permits according to their need. The market enables price signalling and financial reward as permits are traded whilst there are gains from trade. E. g.:
� Nitrogen Oxide and Sulphur Dioxide emission trading in the United States
� Lake Taupo( NZ) nitrogen emissions
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� Provides certainty about emission for all participants and caps total emissions
� Allows emissions to occur for the highest value output
� Facilitates compensation to those who reduce emissions
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� Needs an enforced cap
� Need a clear understanding of actions and sediment transfer outcomes
� Need many buyers and sellers to create a market
� Requires information to allocate credits, design and enforce rules for trade and monitoring and enforcement( which can be costly to enact and administer)
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Offsets |
Approval for a damaging activity is granted if impacts are at least or more than mitigated elsewhere such that no-netimpact or net gain ensues. E. g.:
� Queensland Environmental Offsets( 2017) – vegetation, koala habitat, fish habitat.
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� Provides an external demand for an environmental activity
� Facilitates innovation and flexibility with how environmental outcomes are achieved
� Facilitates low cost environmental outcomes
� Could engage landholders who have been difficult to engage with before
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� Requires an impact to generate the demand for a credit which could result in a net loss
� Can be very costly to create a metric that enables no net loss or net gain transactions
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Landholders driving change: Exploring new incentives | 23 |