Linking Emission Trading Schemes: A Short Note

Economics of Energy & Environmental Policy - Vol. 1 (3):31-38 (2012).

11 Pages Posted: 2 Feb 2010 Last revised: 12 Oct 2013

See all articles by Georg Gruell

Georg Gruell

University of Duisburg-Essen

Luca Taschini

London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment; University of Verona - Department of Economics

Date Written: December 1, 2011

Abstract

In principle, linking emission trading schemes would favour the depletion of low-cost abatement opportunities that are geographically spread over the globe. However, this would only be possible if the price of the emission permits in the different schemes converge to one price. Using a simple model-free structure, the paper first assesses how a unilateral link between two schemes or a bilateral link between schemes with restrictions on the amount of imported permits preempt a correct price convergence. Second, it shows under which conditions bilateral links between schemes with price containment mechanisms allows permit price convergence.

Keywords: Direct Link, EU ETS, Global CO2 Market, Indirect link, Kyoto Protocol

JEL Classification: H23, Q28, Q50, Q58

Suggested Citation

Gruell, Georg and Taschini, Luca, Linking Emission Trading Schemes: A Short Note (December 1, 2011). Economics of Energy & Environmental Policy - Vol. 1 (3):31-38 (2012).. Available at SSRN: https://ssrn.com/abstract=1546105 or http://dx.doi.org/10.2139/ssrn.1546105

Georg Gruell

University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

Luca Taschini (Contact Author)

London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment ( email )

Houghton Street
London, WC2A 2AE
Great Britain

University of Verona - Department of Economics ( email )

Via Cantarane 24
Verona, Verona 37129
Italy

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