Document Type

Book Chapter




kyoto protocol, market mechanisms, economic incentives, emissions trading, instrument choice, multilevel governance






This book chapter presents a discussion of instrument choice in institutional context, with an emphasis on the Kyoto Protocol as an example of environmental benefit trading under a multilevel governance arrangement. Typically, economic models and qualitative discussion of instrument choice implicitly assume that a single regulator selects, designs, and enforces regulatory instruments. Increasingly, however, multiple polities implement regulatory instruments together. The Kyoto Protocol, for example, includes international, regional, national, sub-national, and private roles in the design and enforcement of emissions trading. This chapter emphasizes that design and enforcement are critical, as market mechanisms do not "automatically" produce environmental progress; rather they produce progress if properly designed and enforced and not otherwise.

This chapter recounts the history of market mechanisms' growth, emphasizing the contrast between the United States' success with the acid rain program and its earlier failure with bubble programs. It also discusses the use of market mechanisms around the world, with some emphasis on the intersection between ideology and instrument choice. Finally, it describes the roles of multiple institutional actors in implementing environmental benefit trading under the Kyoto Protocol and analyzes some of the challenges that arise when an instrument is implemented in a complex multi-jurisdictional setting.


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