Evaluation of Incentives in International Sectoral Crediting Mechanisms: A Report for Enel

Abstract

This report considers the incentives of key actors to develop or participate in a sectoral crediting mechanism (SCM) for greenhouse gas emission reductions. Sectoral approaches have become prominent in international discussions of new market mechanisms to reduce greenhouse gas emissions in developing countries and set the stage for broader international agreements. The SCM is a particular form of sectoral approach in which a developing country and a developed country agree upon a crediting baseline level of emissions intensity for a sector that is below the business-as-usual (BAU) level (see Figure ES-1). The developing country would receive valuable credits for reductions below this crediting baseline — based upon its actual emissions intensity and output level — but would incur no liability if the emissions intensity of the sector remained above the crediting baseline level.