How could emissions trading benefit developing countries

This paper aims to show how an emissions trading system could work if some participating entities are allocated an "emissions budget" or non-binding target. This will allow them to sell allowances if their actual emissions are less than their budget, but will not obligate them to buy allowances if their emissions exceed their budget. Different rules aiming at ensuring the environmental integrity of such a system are considered. Parties to the Framework Convention on Climate Change may wish to consider building a regime where developing countries are allocated emissions budgets on some provisions of the Kyoto Protocol and in full respect with the principles of the Convention. In any case such system would be complementary to the Clean Development Mechanism. The potential benefits would be to provide non-Annex-I (developing) countries with substantial capital inflows, and stimulate their economic growth; to allow Annex-I (Industrialised) Countries achieving their Kyoto commitments at the lowest possible cost; and to achieve global participation towards the objective of the Convention while reducing the risk of creating "'tropical hot air" by giving some developing countries more allowances than they need under a "business-as-usual'' scenario. (C) 2000 Elsevier Science Ltd. All rights reserved.