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Summary 3: Choosing a ‘Point of Obligation’
Abstract
In any industry, there is a vertical chain of production and consumption, with several ‘layers’ from initial production to final consumption. For example, in the electricity sector fuel is imported and sold to generators; generators use fuel to create electricity which is sold to retailers; retailers sell the electricity to businesses who use it to create products that they sell, and to households who use the electricity directly.
The ‘points of obligation’ in an emissions trading system are the entities in each industry that are required to report a defined set of information. This information is used to model the GHG emissions relating to each chain of production and consumption. The points of obligation must then surrender sufficient emission units to match those GHG emissions.
Citation
Motu Research. 2007. "Choosing a 'Point of Obligation'," Summary 3 from the series Introduction to Emissions Trading, produced as part of the Climate Change Policy Dialogue.
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