Mitigation costs vary across countries with different resource endowments, economic structure and development, institutional structure, and various other factors. These cost differences provide the opportunity to create and capture the gains from exchange that arise through international co-operative flexibility mechanisms. Mechanisms such as international carbon trading can facilitate collaborative emission reductions across countries and regions, and thereby minimize global control costs (see Chapter 6 for a detailed discussion on the issues involved in establishing such mechanisms).
The assumptions on international co-operative mechanisms include:
Mitigation costs usually fall with greater flexibility for international emissions trading. This suggests that constraints on trading increase the costs of any emission target. Some critics point out that this argument does not address the potential positive impacts on technological development that can arise from implementing GHG emissions reduction policies domestically in developed countries, such as incentives for innovation and R&D.
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