Emissions trading as a policy option for greenhouse gas mitigation in South Africa

Abstract

An emissions trading scheme (ETS) is based on the allocation of allowances to emit pollutants, which in the case of climate change are greenhouse gases. Allowances are allocated to a defined set of emitters, who are required to hold sufficient allowances to cover their emissions at the end of a compliance period, or face penalties. Scarcity is created in the scheme through the allocation of fewer allowances than emissions, resulting in emitters having to choose between reducing their emissions in line with their allowance allocations, or purchasing additional allowances to cover their excess emissions levels.