Linking by Degrees: Incremental Alignment of Cap-and-Trade Markets
Resources for the Future DP 13-04
52 Pages Posted: 17 Apr 2013
Date Written: April 4, 2013
Abstract
National and subnational economies have started implementing carbon pricing systems unilaterally, from the bottom up. Therefore, the potential linking of individual cap-and-trade programs to capture efficiency gains and other benefits is of keen interest. This paper introduces a two-tiered framework to guide policymakers, with an interest in North American policy outcomes. One tier discusses program elements that need to be aligned before trading of allowances across programs can occur. The second identifies benefits of incremental alignment of program elements even prior to trading between programs — which we call “linking by degrees.” We apply this framework to California’s cap-and-trade program and the Regional Greenhouse Gas Initiative. These programs are already linking through cooperation and sharing of information. Many aspects of the program designs are ready for the exchange of allowances within a common market; however, the difference in allowance prices remains an issue to be considered before formal linking could occur.
Keywords: greenhouse gas, climate change, climate policy, policy coordination
JEL Classification: Q58, H77
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
A U.S. Cap-and-Trade System to Address Global Climate Change
-
A Meaningful U.S. Cap-and-Trade System to Address Climate Change
-
Compensation Rules for Climate Policy in the Electricity Sector
By Dallas Burtraw and Karen L. Palmer
-
Decentralization in the EU Emissions Trading Scheme and Lessons for Global Policy
By Joseph A. Kruger, Wallace E. Oates, ...
-
Addressing Climate Change with a Comprehensive U.S. Cap-and-Trade System
-
Addressing Climate Change with a Comprehensive U.S. Cap-and-Trade System
-
Land-Use Change and Carbon Sinks: Econometric Estimation of the Carbon Sequestration Supply Function
By Andrew Plantinga, Ruben N. Lubowski, ...
-
Linkage of Tradable Permit Systems in International Climate Policy Architecture
By Judson L. Jaffe and Robert N. Stavins