A growing number of emerging economies are developing emissions trading schemes (ETSs), which are considered among the most effective climate policy instruments. There are diverse ways to design and operate an ETS. This KAPSARC Discussion Paper analyzes the major design choices involved in setting up ETSs while simultaneously providing an overview of the current state and historical evolution of ETSs globally. It uses quantitative and qualitative data on 38 operational ETSs, grounding this in existing global best practice and academic literature on ETS design. The paper provides an easily accessible resource for understanding ETS design and the various related options and considerations. It is particularly relevant for carbon market stakeholders in countries that are exploring market-based compliance instruments for managing greenhouse gas emissions.
