The Use of Market-Based Instruments in the Transition from a Carbon-Based Economy

The central question of this chapter is to determine how law can act on market forces in transitioning beyond the carbon economy in order to reach a sustainable energy model. New legal instruments based on market regulation are increasingly being used to that purpose and are intended to stimulate the required change of habits. New in their approach, often perceived as complex, even unknown to the individual customer, market-based instruments (MBIs) have become popular tools. They also correspond to the preoccupations of a globalized and competitive energy world, not least because their capacity to be traded internationally. In examining the role of MBIs in transitioning to a lower-carbon future, the experience of the European Union (EU) is relied upon, following its recent initiatives, as well as examples drawn from implementation measures in member states. Comparisons is also drawn with the pioneer of MBIs, i.e. the USA. This chapter also aims to explore the rationales for the use of MBIs (Section II). It analyses the underlying similarities and differences among MBIs (Section III), in particular green (Section IV), white (Section V), and brown certificates (Section VI), in order to assess their cuntioning, legal novelty, and contribution to the carbon transition (Section VII)