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Establishing a transatlantic carbon market

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  • WOLFGANG STERK
  • JOSEPH KRUGER

Abstract

The current emissions trading debates in the EU and the USA were examined and the prospects for creating a transatlantic carbon market were analysed. A future US Emissions Trading Scheme (US ETS) may be designed very differently from the EU ETS, raising questions of compatibility. Crucial differences relate to the stringency of targets, the recognition of offsets, and price control mechanisms. These differences flow directly from the different policy and economic perspectives on emissions trading and climate policy in the USA and the EU. The two sides should therefore seek a way forward that reconciles potentially different climate policies. For example, the USA and the EU should consider an effort to harmonize carbon prices, and US legislation could phase out cost-containment mechanisms after some time period. Finally, both US and EU policies should have mechanisms that allow periodic recalibration, which would allow each to adjust to new technology, react to developing-country climate policies, and learn from each other. In the longer term, this would allow both sides to strive for greater policy convergence, either through linked trading systems, harmonized prices, or a transition from harmonized prices to linkage.

Suggested Citation

  • Wolfgang Sterk & Joseph Kruger, 2009. "Establishing a transatlantic carbon market," Climate Policy, Taylor & Francis Journals, vol. 9(4), pages 389-401, July.
    • Handle: RePEc:taf:tcpoxx:v:9:y:2009:i:4:p:389-401
    DOI: 10.3763/cpol.2009.0623
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    1. Brian C. Murray & Richard G. Newell & William A. Pizer, 2009. "Balancing Cost and Emissions Certainty: An Allowance Reserve for Cap-and-Trade," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(1), pages 84-103, Winter.
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    Cited by:

    1. Fankhauser, Samuel & Hepburn, Cameron, 2010. "Designing carbon markets, Part II: Carbon markets in space," Energy Policy, Elsevier, vol. 38(8), pages 4381-4387, August.
    2. Pizer, William A. & Yates, Andrew J., 2015. "Terminating links between emission trading programs," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 142-159.
    3. Schmidt, Robert C. & Marschinski, Robert, 2010. "Can China benefit from adopting a binding emissions target?," Energy Policy, Elsevier, vol. 38(7), pages 3763-3770, July.

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