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

33 Pages Posted: 2 Aug 2012

See all articles by Matthew Ranson

Matthew Ranson

Abt Associates, Inc.

Robert N. Stavins

Harvard University - Harvard Kennedy School (HKS); Resources for the Future; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: August 2, 2012

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.

Keywords: global climate change, market-based instruments, cap-and-trade, carbon pricing, carbon taxes, linkage, international climate policy architecture

JEL Classification: Q540, Q580, Q400, Q480

Suggested Citation

Ranson, Matthew and Stavins, Robert N., Post-Durban Climate Policy Architecture Based on Linkage of Cap-and-Trade Systems (August 2, 2012). FEEM Working Paper No. 43.2012, Available at SSRN: https://ssrn.com/abstract=2122279 or http://dx.doi.org/10.2139/ssrn.2122279

Matthew Ranson

Abt Associates, Inc. ( email )

55 Wheeler Street
Cambridge, MA 02138-1168
United States

Robert N. Stavins (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

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Cambridge, MA 02138
United States
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617-496-3783 (Fax)

Resources for the Future

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National Bureau of Economic Research (NBER) ( email )

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