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Linking carbon markets: concepts, case studies and pathways

Author

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  • ANDREAS TUERK
  • MICHAEL MEHLING
  • CHRISTIAN FLACHSLAND
  • WOLFGANG STERK

Abstract

The barriers to linking greenhouse gas cap-and-trade schemes are assessed, based on an analysis of existing and emerging trading schemes, including those in the USA, Japan, Australia, New Zealand and the EU. The feasibility of different forms of linking and the time frames for their implementation are examined. In particular, the barriers to direct bilateral linking are considered. It was found that only a few direct bilateral links will be viable in the short term, due to the divergent policy priorities of different nations and regions, reflected in critical design features, such as costcontainment measures. However, in the short term, cap-and-trade markets will very likely be indirectly linked via unilateral links to the CDM or new crediting mechanisms, which may be adopted within a successor treaty to the Kyoto Protocol. In order to ensure a harmonization of critical design elements in the mid to long term, early institutional cooperation may become necessary. Necessary policy steps and the appropriate institutional framework for such harmonization and, overtime, further integration of trading schemes are briefly delineated.

Suggested Citation

  • Andreas Tuerk & Michael Mehling & Christian Flachsland & Wolfgang Sterk, 2009. "Linking carbon markets: concepts, case studies and pathways," Climate Policy, Taylor & Francis Journals, vol. 9(4), pages 341-357, July.
  • Handle: RePEc:taf:tcpoxx:v:9:y:2009:i:4:p:341-357
    DOI: 10.3763/cpol.2009.0621
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    Citations

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    Cited by:

    1. Itkonen, Juha, 2017. "Efficiency and dependency in a network of linked permit markets," Research Discussion Papers 20/2017, Bank of Finland.
    2. Springmann, Marco, 2012. "A look inwards: Carbon tariffs versus internal improvements in emissions-trading systems," Energy Economics, Elsevier, vol. 34(S2), pages 228-239.
    3. Zhang, Xu & Qi, Tian-yu & Ou, Xun-min & Zhang, Xi-liang, 2017. "The role of multi-region integrated emissions trading scheme: A computable general equilibrium analysis," Applied Energy, Elsevier, vol. 185(P2), pages 1860-1868.
    4. Richard S.J. Tol, 2013. "Long live the Kyoto Protocol!," Chapters,in: Handbook on Energy and Climate Change, chapter 14, pages 344-351 Edward Elgar Publishing.
    5. Cason, Timothy N. & Gangadharan, Lata, 2011. "Price discovery and intermediation in linked emissions trading markets: A laboratory study," Ecological Economics, Elsevier, vol. 70(7), pages 1424-1433, May.
    6. repec:eee:resene:v:49:y:2017:i:c:p:33-47 is not listed on IDEAS
    7. 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.
    8. Qi, Tianyu & Weng, Yuyan, 2016. "Economic impacts of an international carbon market in achieving the INDC targets," Energy, Elsevier, vol. 109(C), pages 886-893.
    9. Baran Doda, Simon Quemin, Luca Taschini, 2017. "A theory of gains from trade in multilaterally linked ETSs," GRI Working Papers 275, Grantham Research Institute on Climate Change and the Environment.
    10. repec:eee:enepol:v:111:y:2017:i:c:p:268-280 is not listed on IDEAS
    11. Klepper, Gernot, 2011. "The future of the European Emission Trading System and the Clean Development Mechanism in a post-Kyoto world," Energy Economics, Elsevier, vol. 33(4), pages 687-698, July.
    12. Erik Haites, 2016. "Experience with linking greenhouse gas emissions trading systems," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 5(3), pages 246-260, May.
    13. Michael A. Mehling & Gilbert E. Metcalf & Robert N. Stavins, 2017. "Linking Heterogeneous Climate Policies (Consistent with the Paris Agreement)," Working Papers 2017.51, Fondazione Eni Enrico Mattei.
    14. Knight, Eric, 2010. "The Economic Geography of European Carbon Market Trading," Working Papers 249382, Australian National University, Centre for Climate Economics & Policy.
    15. Simon Quemin & Christian de Perthuis, 2017. "Transitional Restricted Linkage between Emissions Trading Schemes," Working Papers 2017.31, FAERE - French Association of Environmental and Resource Economists.
    16. Adrian Amelung, 2014. "Emissionshandelssysteme für Treibhausgase: Funktionsweise und Vergleich bestehender Ausprägungsformen," Otto-Wolff-Institut Discussion Paper Series 05/2014, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.
    17. Kamleshan Pillay & Jorge E. Viñuales, 2016. "“Monetary” rules for a linked system of offset credits," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 16(6), pages 933-951, December.

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