Striving to keep ETS Simple: Current practices to manage complexity in emissions trading

Policymakers considering or reforming an ETS must navigate the trade-off between minimizing the administrative burden of the policy while ensuring system integrity. This has sparked interest among practitioners for ways to keep ETS simple yet robust. A new ICAP report examines options for simplification in both the design phase and specific areas of operation, outlining approaches, experiences, and lessons from existing systems to date.

The report finds that considering simplicity as an objective in the planning phase can yield important benefits. Most opportunities for simplification, however, lie in ETS operations, particularly around thresholds for smaller emitters; tiered approaches to monitoring, reporting, and verification (MRV); data management techniques; and secure but simple registry operation. The report explores practices to reduce the administrative burden and increase user friendliness across those areas, including “soft” approaches such as knowledge sharing, capacity building, and inter-agency coordination.