6 Conclusion
39. Carbon
pricing, and emissions trading in particular, is an established
and well recognised policy instrument for controlling greenhouse
gas emissions in a cost effective way because it provides flexibility
to participants on how they want to reduce their emissions. A
global carbon market would be the most favourable outcome in the
long term because it is one of the most economically efficient
ways to reduce emissions. However, attempting to achieve this
benign outcome by means of a top-down process is extremely unlikely
to succeed. Instead a bottom-up approach aimed at developing a
network of regional, national and sub-national emissions trading
systems, which gradually come together by linking, is much more
likely. A global climate agreement that promotes carbon pricing
and is favourable to linking represents the best chance of developing
a global carbon market in the long term. The move towards a hybrid
approach-which combines top-down elements for establishing and
reviewing targets, with bottom-up elements of pledge-and-review
tied to national policies and actions-in the international climate
negotiations could significantly improve the prospects of linking
carbon markets and is a welcome development. The world's largest
economies, which have embraced emissions trading, China, the US
and the EU will be the leading players in this process. As the
first pioneering adopter of emissions trading and a strong advocate
for market-based carbon pricing policies, the UK Government has
an absolutely vital role to play in driving forward international
linkage.
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