It is important to consider cost implications, given that there might be a trade-off between increasing the efficiency of existing technologies and investment in new technologies. Governments have a clear responsibility to set a framework to guide choices and to help to promote an environment where efficient and new technologies can be disseminated, but choices about technologies are best left to the market. Each energy cycle must be assessed and optimised as a whole. The definition and use of an effective energy mix portfolio can then be optimised by member states according to their energy sources and market needs while responding to their environmental and socio-economic constraints. The Kyoto Protocol has created flexible mechanisms as a means to reduce compliance costs.
Flexible mechanisms promote innovative and cost-effective solutions.
While rules and modalities on flexible mechanisms still need to be decided, governments and industry have begun to experiment with these new tools. In the EU, emissions trading between and within companies has currently attracted the most interest. Emissions trading is well suited to climate change policy as a means of translating national targets into sectoral and company targets. A less discussed advantage of emissions trading is that it becomes a way of focusing the attention of a company s management on climate change. Emissions trading is not a panacea, however, and both its efficiency and effectiveness will depend on how emissions trading schemes are implemented.