Market dynamics under the ETS could also worsen over time: as emissions approach zero, the number of market players would shrink, and low market liquidity and unbalanced market power could hinder effective price discovery and market function Finally, insofar as the government aims to make use of RUs outside of the ETS, and if the responsibility for the purchase of these units falls on the governme. [...] The fiscal balance for the regulator would thus depend on the price paid for RUs in the removals market, on whether RUs are sold by the regulator under the ETS and for what price, and on price impacts (such as decreased auction revenues) due to the higher availability of units under the ETS. [...] • Main opportunities: Model C retains most of the opportunities of Model B, with the notable exception that the effectiveness of the ETS as a source of demand for RUs would depend crucially on the price differentials between the ETS and the removals market. [...] The various models on interactions between ETSs and removals explored in this paper differ primarily in terms of the level of government control over the balance of abatement and removals in the system; the flexibility on cap-setting and how to deal with residual emissions; the impacts on the market expectations that could lead to myopic behavior and high carbon lock-in; the avenues for additional. [...] On the international level and beyond ETS, Switzerland and Peru have entered into bilateral cooperation on the implementation of mitigation activities through Article 6 of the Paris Agreement, that include the transfer of removals which are to fulfil robust requirements on the permanence and additionality of the emissions reductions achieved (Swiss Federal Office for the Environment (FOEN), 2019).
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