Linking Emissions Trading Schemes: An Assessment with Regard to Environmental Integrity
15 Pages Posted: 2 Dec 2008
Date Written: December 2, 2008
This paper critically assesses the potential for linkage of emissions trading schemes (ETS) designed to curb greenhouse gases. Based on current negotiations in order to link domestic schemes, we highlight the institutional barriers that exist due to different design options. Among these barriers, we highlight the potential negative effects on environmental integrity that arise from linking a rate-based system with an absolute system. Our results therefore suggest that increasing interests in linking ETS shall not be exempt from careful regulatory appraisal ex ante. Besides, we raise new questions by demonstrating how the linking process has an impact on agents' choices of technology and pollution levels.
Keywords: Emissions trading, linkage, rate-based system, absolute system, environmental integrity, EU ETS, European carbon market, Canadian Large Final Emitters System
JEL Classification: Q50, Q53
Suggested Citation: Suggested Citation