But prohibiting JI credits because of uncertainty would eliminate the opportunity to engage countries without national emissions caps in early GHG control efforts, as well as the opportunity to obtain low-cost abatement services in those countries. Investors could seek extra credits for providing more reliable emissions accounting, thus creating incentives to improve measurement capabilities in developing countries. Critics also worry that it would be difficult to allocate emissions allowances among countries. And without trading, dispositive national caps would be much harder to negotiate. If they had flexibility to reallocate emissions allowances through trading after a treaty had been signed, negotiators would face less pressure to devise ideal, permanent allocations in the treaty itself.
Some concerns do apply with special force to market-based emissions trading regimes.
First, should the costs of arranging transactions in an emissions abatement market be high, they would impede trades and raise total costs. The transaction costs of JI appear to be very high. Partners are hard to identify, each negotiation is novel, each project must be approved by the host and investor governments, and each investor must monitor its own projects. Moreover, JI typically involves investors supporting and bearing the risk of entire projects. The costs of transacting in a formal allowance trading market would be much lower, especially if fungible allowances were traded on organized exchanges.