The prospects for an international agreement within the United Nations Framework on Climate Change (UNFCCC) resulting in a common carbon price ‐ such as a global cap and trade scheme ‐ can for now only be seen as a long term goal. In the meantime, we have to work in a world of unilateral climate policies, eventually loosely coordinated among a limited number of countries. Two key considerations need be addressed in the design of these policies: equity for emerging countries, and competitiveness for carbon intensive internationally traded sectors. This context has generated a renewed interest in sectoral approaches. This paper provides a sound methodological framework to discuss equity and efficiency issues in sectoral approaches, makes a proposal that addresses these national requirements, and discusses some related implementation issues. The proposed approach combines basic components put forward by industry such as absolute caps for industrialized countries and intensity targets for emerging countries, BTA for those countries that do not adopt the sectoral approach, as well as reduced eligibility of these countries to benefit from the financial transfers collected through CO2 revenues in industrialized countries. The proposal is applied to the case of the cement industry.
