KAPSARC – Design Elements for Effective Compliance Markets: Insights From Existing Emissions Trading Schemes

This report focuses on how governments can design effective market-based compliance schemes, specifically emissions trading schemes (ETS), to achieve greenhouse gas emission reductions while balancing economic and social priorities.

It addresses major design options for ETS including sectoral and GHG coverage, emission caps, allowance distribution, price signals, and flexibility for participants. The report discusses trade-offs between design options and provides lessons learned from 37 existing ETSs worldwide. It uses data from the World Bank and International Carbon Action Partnership (ICAP) along with academic and technical literature. This resource is intended for governments and carbon market stakeholders developing new compliance schemes.