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Terminating links between emission trading programs

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  • Pizer, William A.
  • Yates, Andrew J.

Abstract

Links between emission trading programs are not immutable, as highlighted by New Jersey׳s exit from the Regional Greenhouse Gas Initiative in 2011. This raises the question of what to do with existing permits that are banked for future use—choices that have consequences for market behavior in advance of, or upon speculation about, delinking. We consider two delinking policies. One differentiates banked permits by origin, the other treats banked permits the same. We describe the price behavior and relative cost-effectiveness of each policy. Treating permits differently generally leads to higher costs, and may lead to price divergence, even with only speculation about delinking.

Suggested Citation

  • Pizer, William A. & Yates, Andrew J., 2015. "Terminating links between emission trading programs," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 142-159.
    • Handle: RePEc:eee:jeeman:v:71:y:2015:i:c:p:142-159
    DOI: 10.1016/j.jeem.2015.03.003
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    Cited by:

    1. Simon Quemin & Christian Perthuis, 2019. "Transitional Restricted Linkage Between Emissions Trading Schemes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 1-32, September.
    2. Bodansky, Daniel M. & Hoedl, Seth A. & Metcalf, Gilbert E. & Stavins, Robert N., "undated". "Facilitating Linkage of Heterogeneous Regional, National, and Sub-National Climate Policies Through a Future International Agreement," Climate Change and Sustainable Development 202114, Fondazione Eni Enrico Mattei (FEEM).
    3. Matthew Ranson & Robert N. Stavins, 2016. "Linkage of greenhouse gas emissions trading systems: learning from experience," Climate Policy, Taylor & Francis Journals, vol. 16(3), pages 284-300, April.
    4. Koch, Nicolas & Grosjean, Godefroy & Fuss, Sabine & Edenhofer, Ottmar, 2016. "Politics matters: Regulatory events as catalysts for price formation under cap-and-trade," Journal of Environmental Economics and Management, Elsevier, vol. 78(C), pages 121-139.
    5. Richard S.J. Tol, 2017. "Leaving an emissions trading scheme – insights from the United Kingdom," Working Paper Series 1017, Department of Economics, University of Sussex Business School.
    6. Doda, Baran & Quemin, Simon & Taschini, Luca, 2019. "Linking permit markets multilaterally," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    7. Suzi Kerr & Judd Ormsby, 2016. "The New Zealand Emissions Trading Scheme de-link from Kyoto: impacts on banking and prices," Working Papers 16_13, Motu Economic and Public Policy Research.
    8. Baran Doda & Simon Quemin & Luca Taschini, 2017. "A Theory of Gains from Trade in Multilaterally Linked ETSs," Working Papers 1706, Chaire Economie du climat.
    9. Diniz Oliveira, Thais & Costa Gurgel, Angelo & Tonry, Steve, 2019. "International market mechanisms under the Paris Agreement: A cooperation between Brazil and Europe," Energy Policy, Elsevier, vol. 129(C), pages 397-409.
    10. Richard S J Tol, 2018. "Policy Brief—Leaving an Emissions Trading Scheme: Implications for the United Kingdom and the European Union," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 183-189.
    11. Woerman, Matt, 2023. "Linking carbon markets with different initial conditions," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    12. Lambert Schneider & Michael Lazarus & Carrie Lee & Harro van Asselt, 2017. "Restricted linking of emissions trading systems: options, benefits, and challenges," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 17(6), pages 883-898, December.
    13. Mehling, Michael A. & Metcalf, Gilbert E. & Stavins, Robert N., 2017. "Linking Heterogeneous Climate Policies (Consistent with the Paris Agreement)," MITP: Mitigation, Innovation and Transformation Pathways 266282, Fondazione Eni Enrico Mattei (FEEM).
    14. Peter Zaman & Adam Hedley, 2016. "Networked Carbon Markets," World Bank Publications - Reports 26430, The World Bank Group.
    15. N. Keohane & A. Petsonk & A. Hanafi, 2017. "Toward a club of carbon markets," Climatic Change, Springer, vol. 144(1), pages 81-95, September.
    16. Baran Doda & Luca Taschini, 2017. "Carbon Dating: When Is It Beneficial to Link ETSs?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(3), pages 701-730.
    17. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2021. "Strategic Export Motives and Linking Emission Markets," CESifo Working Paper Series 8847, CESifo.

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    More about this item

    Keywords

    Emissions trading; Linking; Delinking; Speculation;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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