International Carbon Action Partnership (ICAP)

ICAP organizes public conferences, conducts workshops and drafts papers on important ETS design and operation issues.

As one of ICAP’s central activities, the technical dialog provides a platform for exchange among members and experts on issues related to ETS design and operation. ICAP establishes working groups and organizes workshops, webinars and public events on key ETS design elements with a long-term goal of creating a well-functioning global carbon market through linking ETSs.

Technical dialogue topics that ICAP is currently working on or recently completed include linking, ETS simplification, establishing a long-run carbon price signal, emissions trading and electricity sector regulation, and free allocation.

Past topics have included competitiveness and carbon leakage, market oversight, monitoring reporting and verification (MRV), and offsets.

Linking
Exploring pathways and facilitating the way toward linking ETSs is at the core of ICAP’s mandate and has been a key focus of its technical dialog since 2014. ICAP has released a Guide to linking ETSs, a practical handbook that reflects lessons learned from jurisdictions (i.e. the EU, Switzerland, WCI States, RGGI, Tokyo and Saitama) that have linked or entered into linking negotiations. It covers the whole life cycle of linking, from the rationale, pathways and harmonization needs to the linking agreement and managing a linked market.

In 2015, ICAP published ‘Linking Emissions Trading Systems: A Summary of Current Research’, which outlines the rationale for linking and assesses the importance of harmonization as precondition to linking. A significant portion of the linking literature focuses on full linking. Yet achieving this may not always be feasible and/or desirable. The same year, ICAP published ‘Options and Issues for Restricted Linking of Emissions Trading Schemes’, a paper by the Stockholm Environment Institute, that explores alternatives to full linking, such as the use of quotas and exchange rates.
ETS Simplification
The trade-off between policy effectiveness and administrative costs of operation challenges ETS jurisdictions. Both the real and perceived burden of a system can undermine its support and jeopardize its objectives. The question of how to keep ETSs simple has attracted significant interest both among policymakers of established systems and ETS aspirants. Streamlining the operation of ETSs and improving user friendliness are therefore essential to the ongoing success of the policy. To date, different approaches have been implemented, and a range of actions have been taken to reduce the compliance burden on covered entities and regulators alike, while still maintaining the effectiveness and integrity of the policy.

Against this background, ICAP has initiated a work stream on the topic of ‘ETS Simplification’, which started in 2016 with a survey collecting experiences from the different existing systems. The survey results were presented and discussed during a technical workshop at the ICAP Meeting 2016, which aimed at sharing experiences on the diverse approaches adopted by members. The ICAP Secretariat in 2019 has released a discussion paper, 'Striving to Keep ETS Simple: Current practices to manage complexity in emissions trading', on the basis of the survey results and of the outcomes of the meeting. The paper aims at promoting a constructive dialogue among policymakers and operational staff engaged in the topic by providing an empirically grounded, cross-system mapping of options for ETS simplification, highlighting experiences and best practices from existing ETS around the world.
Emissions Trading and the Role of a Long Run Carbon Price Signal
The question of how emissions trading systems (ETS) can provide a carbon price signal that incentivizes cost-effective emissions abatement over the long term is key to the instrument’s contribution to tackling climate change.

As part of its 2016-2017 work program, ICAP published ‘Emissions Trading and the Role of a Long-run Carbon Price Signal’, a research paper drafted in partnership with the Mercator Research Institute on Global Commons and Climate Change (MCC) and Resources for the Future (RFF). The study introduces and applies a framework for understanding dynamic cost effectiveness under an ETS and map s options to address market and regulatory imperfections in emissions trading. Specifically, the paper focuses on tools to manage the allowance market; commitments to long term targets, as well as how jurisdictions can create constituents that have an active interest in supporting and strengthening ETS. The draft paper was presented and discussed at a technical workshop at the 2016 ICAP Annual Meeting.
Allocation
ICAP dedicated several workshops and webinar to the issue of allocation, looking into various methods. A closed door, general workshop on allocation was held on November 13th 2008, in Washington DC. The workshop discussed different allocation methods and their associated challenges, with the objective of developing a common understanding of the impacts of various allocation methods on the overall functioning of the respective system. Insights from the allocation process in the EU ETS were presented.

ICAP organized a webinar to take stock of auctioning provisions in ICAP members jurisdictions on November 19th, 2009. The focus of this webinar was to identify the main design features of different auctioning systems and take an inventory of auctioning provisions in all ICAP jurisdictions.

On July 6th, 2011 a webinar on the issue of benchmarking was held by ICAP. The webinar included a presentation by Heiko Kunst, Policy Officer at the European Commission, which focused on the rationale for benchmarking, criteria for the definition of benchmarks, and EU ETS solutions to practical problems of the benchmarking approach. In September 2012, a public workshop on industrial benchmarks was jointly organized with North America 2050 (more information is available here).
Competitiveness
ICAP hosted a closed-door workshop on competitiveness and carbon leakage on June 16th 2010 in Tokyo. The workshop provided a forum for an open and strategic discussion amongst ICAP members and selected observers on competitiveness and carbon leakage issues and to identify answers to questions such as to what extent leakage concerns are justified and which options are at hand to tackle such concerns.

In June 2020, ICAP released its report Carbon Leakage and Deep Decarbonization: Future-proofing Carbon Leakage Protection. The report provides a review of current efforts to address carbon leakage, assess the risk of carbon leakage, and policies to strengthen decarbonization efforts in light of ongoing leakage vulnerability and the push to achieve net-zero emissions.
Market Oversight
On October 12th, 2011, ICAP hosted a closed-door workshop in Berlin on the topic of market oversight in an ETS. It provided the opportunity for exchanging views on different regulative approaches in related markets and their possible reference to the carbon market. The views of ICAP members on the role of market oversight and specific technical details of this issue were exchanged, with the aim of reaching a common understanding of the limitation and the scope of regulating the carbon market and of an adequate future market oversight structure.

Follow up activities included the production of a carbon market oversight primer and an ICAP webinar held in July 2012 to discuss findings and compare different approaches of individual ICAP members.
Monitoring, Reporting, Verification (MRV)
Together with the German DEHSt (Germany’s emissions trading authority) ICAP co-organized in April 2010 a webinar on CO2 monitoring and reporting within the EU Emissions Trading Scheme with a German perspective. The presentation included information on the EU ETS monitoring and reporting procedures in Germany, before a discussion on monitoring and reporting in the context of linking. Several public events were organized around the topic of Monitoring, Reporting and Verification, and generally emissions data management, see the First Global Carbon Forum 2008 on MRVCE and the ICAP China Conference 2009 on Emissions Data Management.
Offsets
A workshop in Vancouver on May 19th 2009 provided a forum for discussion amongst ICAP members and observers on domestic and international offsets. Issues discussed included the rationale behind offsets, the experiences at hand with regard to different types of offsets, what monitoring issues can arise in the context of offsets, and the possible effects of different regulations on offsets on future linking of cap and trade systems.

Two webinars were subsequently organized in June 2009. The first regarded the role of CDM and sectoral crediting mechanism following the negotiations in Bonn. The second webinar focused on California’s plans for international offsets and sectoral agreements with China.

A second closed-door workshop under the title “Offsets revisited” was hosted by ICAP on November 17th, 2010 in Sacramento, CA. Given the dynamics and importance of this topic at the time, also with regard to possible linking of ETS, ICAP decided to devote another internal workshop to offsets in order to discuss new developments in ICAP member and observer jurisdictions as well as the debate in the UN negotiations and other multilateral fora.
ICAP - NA 2050 Joint Workshop 2012 on Benchmarks
On 24 September 2012, ICAP co-hosted a public workshop with North America 2050 (NA2050) on industrial energy or greenhouse gas emissions benchmarks in New York.

The workshop aimed to explore current approaches to developing industrial energy or greenhouse gas emissions benchmarks, including those being implemented in the EU, California, and elsewhere. Participants identified international best practices for benchmarking and discussed benefits of coordinating benchmarking efforts.

The workshop's program and presentations are available for download below.

Background

In major OECD countries direct and indirect emissions of GHG from industry account for up to one-third of total end-use greenhouse gas (GHG) emissions. Policymakers at a variety of government levels are considering policies to address these emissions. Benchmarking, which assesses GHG emissions performance across facilities or against a common standard, can be used in various policy approaches, including:
- Regulation of GHG emissions through a cap-and-trade program along with free allocation of emissions allowances to industry sectors in proportion to output based on an emissions performance benchmark;
- Regulatory GHG performance standards, where individual facilities are required to meet an emissions performance standard;
- Energy efficiency targets, either regulatory or voluntary and
- Voluntary performance goals in which participating companies commit to achieving a particular emissions benchmark by a particular year.
Against this background, the North American greenhouse gas regulatory landscape has recently been evolving at both federal and sub-national levels, putting GHG emissions benchmarks up on the agenda of U.S. states and Canadian provinces committed to reducing their emissions. Beyond North America, other jurisdictions are also developing benchmarks as a means to reduce GHG emissions, particularly in the European Union as part of the revision of its emissions trading system (ETS) in preparation of Phase III.
- Joint Benchmarking Workshop - Agenda Download
- All Presentations of Session 1 Download
- All Presentations of Session 2 Download
- All Presentations of Session 3 Download
- All Presentations of Session 4 Download
- All Presentations of Session 5 Download

ICAP will establish an expert forum to discuss relevant questions on the design, compatibility and potential linkage of regional carbon markets.

- ICAP Political Declaration, 2007

Technical Dialog

ICAP organizes public conferences, conducts workshops and drafts papers on important ETS design and operation issues.

Linking

ETS Simplification

Emissions Trading and the Role of a Long Run Carbon Price Signal

Allocation

Competitiveness

Market Oversight

Monitoring, Reporting, Verification (MRV)

Offsets

ICAP - NA 2050 Joint Workshop 2012 on Benchmarks