The Liability Rules Under International GHG Emissions Trading

Posted: 15 May 2002

See all articles by ZhongXiang Zhang

ZhongXiang Zhang

Tianjin University - Ma Yinchu School of Economics

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Article 17 of the Kyoto Protocol authorises emissions trading, but the rules governing emissions trading have been deferred to subsequent conferences. In designing and implementing an international greenhouse gas (GHG) emissions trading scheme, assigning liability rules has been considered to be one of the most challenging issues. In general, a seller beware liability works well in a strong enforcement environment. In the Kyoto Protocol, however, it may not always work. By contrast, a buyer beware liability could be an effective deterrent to non-compliance, but the costs of imposing it are expected to be very high. To strike a middle ground, we suggest a combination of preventative measures with strong but feasible end-of-period punishments to ensure compliance with the Kyoto emissions commitments. Such measures aim to maximize efficiency gains from emissions trading and at the same time, to minimize over-selling risks.

Keywords: Emissions trading, Greenhouse gases, Seller beware liability, Buyer beware liability, Kyoto Protocol

JEL Classification: Q28, Q25, Q48, Q43

Suggested Citation

Zhang, ZhongXiang, The Liability Rules Under International GHG Emissions Trading. Available at SSRN:

ZhongXiang Zhang (Contact Author)

Tianjin University - Ma Yinchu School of Economics ( email )

92 Weijin Road, Nankai District
Tianjin 300072
+86 22 87370560 (Phone)


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