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Linking Emission Trading Schemes: A Short Note

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  • Georg Grull
  • Luca Taschini

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.

Suggested Citation

  • Georg Grull & Luca Taschini, 2012. "Linking Emission Trading Schemes: A Short Note," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 3).
    • Handle: RePEc:aen:eeepjl:1_3_a08
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    References listed on IDEAS

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    1. Michael Mehling & Erik Haites, 2009. "Mechanisms for linking emissions trading schemes," Climate Policy, Taylor & Francis Journals, vol. 9(2), pages 169-184, January.
    2. Erik Haites & Michael Mehling, 2009. "Linking existing and proposed GHG emissions trading schemes in North America," Climate Policy, Taylor & Francis Journals, vol. 9(4), pages 373-388, July.
    3. Grüll, Georg & Taschini, Luca, 2011. "Cap-and-trade properties under different hybrid scheme designs," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 107-118, January.
    4. Carolyn Fischer, 2003. "Combining rate-based and cap-and-trade emissions policies," Climate Policy, Taylor & Francis Journals, vol. 3(sup2), pages 89-103, December.
    5. Judson Jaffe & Robert N. Stavins, 2008. "Linkage of Tradable Permit Systems in International Climate Policy Architecture," NBER Working Papers 14432, National Bureau of Economic Research, Inc.
    6. N. Anger & B. Brouns & J. Onigkeit, 2009. "Linking the EU emissions trading scheme: economic implications of allowance allocation and global carbon constraints," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(5), pages 379-398, June.
    7. Nicholas Stern, 2008. "The Economics of Climate Change," American Economic Review, American Economic Association, vol. 98(2), pages 1-37, May.
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    Cited by:

    1. Beat Hintermann & Marc Gronwald, 2019. "Linking with Uncertainty: The Relationship Between EU ETS Pollution Permits and Kyoto Offsets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 761-784, October.
    2. Simon Quemin & Christian Perthuis, 2019. "Transitional Restricted Linkage Between Emissions Trading Schemes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 1-32, September.
    3. Kanamura, Takashi, 2016. "Role of carbon swap trading and energy prices in price correlations and volatilities between carbon markets," Energy Economics, Elsevier, vol. 54(C), pages 204-212.
    4. Niklas Lüder Barre & Marc Gronwald & Jana Lippelt, 2012. "Emissions Trading and Energy Policy – Worldwide Trends and Current Problems," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(04), pages 50-53, December.
    5. Mario A. Fernandez & Adam J. Daigneault, 2018. "Money Does Grow On Trees: Impacts Of The Paris Agreement On The New Zealand Economy," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 1-23, August.
    6. Niklas Lüder Barre & Marc Gronwald & Jana Lippelt, 2012. "Kurz zum Klima: Emissionshandel – weltweite Entwicklungen und aktuelle Probleme," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 65(17), pages 26-28, September.
    7. repec:ces:ifodic:v:10:y:2012:i:4:p:19074528 is not listed on IDEAS

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