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Post-Durban Climate Policy Architecture Based on Linkage of Cap-and-Trade Systems

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  • Matthew Ranson
  • Robert N. Stavins

Abstract

The outcome of the December 2011 United Nations climate negotiations in Durban, South Africa, provides an important new opportunity to move toward an international climate policy architecture that is capable of delivering broad international participation and significant global CO2 emissions reductions at reasonable cost. We evaluate one important component of potential climate policy architecture for the post-Durban era: links among independent tradable permit systems for greenhouse gases. Because linkage reduces the cost of achieving given targets, there is tremendous pressure to link existing and planned cap-and-trade systems, and in fact, a number of links already or will soon exist. We draw on recent political and economic experience with linkage to evaluate potential roles that linkage may play in post-Durban international climate policy, both in a near-term, de facto architecture of indirect links between regional, national, and sub-national cap-and-trade systems, and in longer-term, more comprehensive bottom-up architecture of direct links. Although linkage will certainly help to reduce long-term abatement costs, it may also serve as an effective mechanism for building institutional and political structure to support a future climate agreement.

Suggested Citation

  • Matthew Ranson & Robert N. Stavins, 2012. "Post-Durban Climate Policy Architecture Based on Linkage of Cap-and-Trade Systems," NBER Working Papers 18140, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18140
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    References listed on IDEAS

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    1. Valentina Bosetti & David Tomberlin, 2004. "Fondazione Eni Enrico Mattei," Working Papers 2004.102, Fondazione Eni Enrico Mattei.
    2. Robert W. Hahn & Robert Stavins, 1999. "What Has the Kyoto Protocol Wrought? The Real Architecture of Tradable Permit Markets," Books, American Enterprise Institute, number 52837.
    3. repec:reg:rpubli:70 is not listed on IDEAS
    4. Zhang, Junjie & Wang, Can, 2011. "Co-benefits and additionality of the clean development mechanism: An empirical analysis," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 140-154, September.
    5. Kruger, Joseph & Oates, Wallace E. & Pizer, William A., 2007. "Decentralization in the EU Emissions Trading Scheme and Lessons for Global Policy," Discussion Papers dp-07-02, Resources For the Future.
    6. Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, vol. 87(12), pages 2737-2747, December.
    7. Valentina Bosetti & Sergey Paltsev & John Reilly & Carlo Carraro, 2011. "Emissions Pricing to Stabilize Global Climate," Working Papers 2011.80, Fondazione Eni Enrico Mattei.
    8. Eric Karpas & Suzi Kerr, 2011. "Preliminary Evidence on Responses to the New Zealand Forestry Emissions Trading Scheme," Working Papers 11_09, Motu Economic and Public Policy Research.
    9. Montagnoli, Alberto & de Vries, Frans P., 2010. "Carbon trading thickness and market efficiency," Energy Economics, Elsevier, vol. 32(6), pages 1331-1336, November.
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    Citations

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    Cited by:

    1. Bodansky, Daniel M. & Hoedl, Seth A. & Metcalf, Gilbert E. & Stavins, Robert N., 2014. "Facilitating Linkage of Heterogeneous Regional, National, and Sub-National Climate Policies through a Future International Agreement," Working Paper Series rwp14-056, Harvard University, John F. Kennedy School of Government.
    2. 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.
    3. Eva-Maria Mauer, 2016. "Linking von Emissionshandelssystemen: Die EU als Vorreiter für einen globalen CO2-Markt?," Discussion Paper Series RECAP15 25, RECAP15, European University Viadrina, Frankfurt (Oder).
    4. Richard Schmalensee & Robert N. Stavins, 2015. "Lessons Learned from Three Decades of Experience with Cap-and-Trade," Working Papers 2015.107, Fondazione Eni Enrico Mattei.
    5. Manikas, Andrew S. & Kroes, James R., 2015. "A newsvendor approach to compliance and production under cap and trade emissions regulation," International Journal of Production Economics, Elsevier, vol. 159(C), pages 274-284.
    6. Sabine Aresin, 2015. "Monitoring Abatement in the Presence of an Import Quota on CERs," Working Papers tax-mpg-rps-2015-11, Max Planck Institute for Tax Law and Public Finance.
    7. Francesco Bosello & Ramiro Parrado, 2014. "Climate Change Impacts and Market Driven Adaptation: the Costs of Inaction Including Market Rigidities," Working Papers 2014.64, Fondazione Eni Enrico Mattei.
    8. repec:adr:anecst:y:2017:i:127:p:163-201 is not listed on IDEAS
    9. Holtsmark, Katinka & Midttømme, Kristoffer, 2015. "The Dynamics of Linking Permit Markets," Memorandum 02/2015, Oslo University, Department of Economics.
    10. Bernard Caillaud & Gabrielle Demange, 2017. "Joint Design of Emission Tax and Trading Systems," Annals of Economics and Statistics, GENES, issue 127, pages 163-201.
    11. repec:oup:renvpo:v:11:y:2017:i:1:p:59-79. is not listed on IDEAS
    12. 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.

    More about this item

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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