Climate Policy

Climate Policy 5 (2005) 147–165

Review Article

Market penetration metrics: tools for additionality assessment?

Sivan Kartha, Michael Lazarus and Maurice LeFranc

Received 18 September 2003 ; received in revised form 22 June 2005 ; accepted 22 June 2005

Project-based emission reduction or ‘offset’ programs are being implemented widely, from the CDM (Clean Development Mechanism) to corporate voluntary efforts and municipal and state-level activities. Additionality assessment remains a central and persistent challenge in all programs. Concerns have been raised with methods currently used, such as investment analysis, barrier analysis, and performance thresholds. They have been variously critiqued for high costs, resistance to standardization, weak environmental integrity, and susceptibility to gaming. Technology penetration rates provide another means to infer additionality, and could be a potentially useful complement to other methods. The notion is that emerging technologies with low but increasing penetration rates typically require some type of support, as might be provided through offsets markets, to compete effectively in the marketplace. For penetration rate analysis to provide a useful tool for additionality assessment, several fundamental questions need to be addressed. What do penetration rates represent and how can they be measured? How can additionality evaluation utilize penetration rates? For which sectors and project types are the use of penetration rates most promising? This article shows that penetration tests have a mixture of pluses and minuses, with greater relevance in certain market niches and regions. Reasonable ranges for penetration thresholds are discussed, along with partial crediting approaches to reduce ‘knife-edge’ effects.

Keywords: Greenhouse gas mitigation; Emissions trading; Carbon offsets; Clean Development Mechanism; Additionality; Penetration rate

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