The impact of policy on regulation: should certainty trump the need for flexibility?

摘要

Given that emissions trading schemes are the constructs of governments, they can be heavily impacted by changing policy and politics. The objectives underlying the scheme are of utmost significance. Regulators, while retaining mechanisms that incorporate some element of flexibility, should adhere strictly to these objectives in order to demonstrate certainty to market participants. Ultimately, as emissions trading schemes such as the EU ETS and CPM develop, it is the evolving science that may ensure that the need for flexibility trumps the desire for certainty, as existing markets may need to be redesigned to adapt to the challenges that climate change will continue to present.