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Linking by Degrees: Incremental Alignment of Cap-and-Trade Markets

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  • Burtraw, Dallas

    ()
    (Resources for the Future)

  • Palmer, Karen

    ()
    (Resources for the Future)

  • Munnings, Clayton

    ()
    (Resources for the Future)

  • Weber, Paige
  • Woerman, Matt

    ()
    (Resources for the Future)

Abstract

National and subnational economies have started implementing carbon pricing systems unilaterally, from the bottom up. Therefore, the potential linking of individual cap-and-trade programs to capture efficiency gains and other benefits is of keen interest. This paper introduces a two-tiered framework to guide policymakers, with an interest in North American policy outcomes. One tier discusses program elements that need to be aligned before trading of allowances across programs can occur. The second identifies benefits of incremental alignment of program elements even prior to trading between programs—which we call “linking by degrees.” We apply this framework to California’s cap-and-trade program and the Regional Greenhouse Gas Initiative. These programs are already linking through cooperation and sharing of information. Many aspects of the program designs are ready for the exchange of allowances within a common market; however, the difference in allowance prices remains an issue to be considered before formal linking could occur.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-13-04.

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Date of creation: 05 Apr 2013
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Handle: RePEc:rff:dpaper:dp-13-04

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Related research

Keywords: greenhouse gas; climate change; climate policy; policy coordination;

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References

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  1. repec:oup:renvpo:v:6:y::i:1:p:65-85 is not listed on IDEAS
  2. Olmstead, Sheila M. & Stavins, Robert N., 2010. "Three Key Elements of Post-2012 International Climate Policy Architecture," Working Paper Series rwp10-030, Harvard University, John F. Kennedy School of Government.
  3. repec:oup:renvpo:v:6:y::i:1:p:110-129 is not listed on IDEAS
  4. Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, vol. 87(12), pages 2737-2747, December.
  5. Charles A. Holt & William Shobe & Dallas Burtraw & Karen Palmer & Jacob K. Goeree, 2007. "Auction Design for Selling CO2 Emission Allowances Under the Regional Greenhouse Gas Initiative," Reports 2007-03, Center for Economic and Policy Studies.
  6. Gilbert E. Metcalf & David Weisbach, 2012. "Linking Policies When Tastes Differ: Global Climate Policy in a Heterogeneous World," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 6(1), pages 110-129.
  7. Flachsland, Christian & Marschinski, Robert & Edenhofer, Ottmar, 2009. "Global trading versus linking: Architectures for international emissions trading," Energy Policy, Elsevier, vol. 37(5), pages 1637-1647, May.
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Cited by:
  1. Matthew Ranson & Robert Stavins, 2014. "Linkage of Greenhouse Gas Emissions Trading Systems: Learning from Experience," NBER Working Papers 19824, National Bureau of Economic Research, Inc.

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