Publication: Lessons Learned from Linking Emissions Trading Systems: General Principles and Applications
Date
2014-02
ISSN
Published
2014-02
Author(s)
Partnership for Market Readiness
Abstract
In support of the partnership for market
readiness work on helping the emergence of credible,
consistent, and compatible market-based infrastructure
across countries, this report reviews the lessons learned
from linking greenhouse gas emissions trading systems. Two
emissions trading systems (ETS) are linked if a participant
in one system can use a compliance instrument (allowance or
credit) issued by the administrator of either system for
compliance. This report focuses on links that enable
participants of both ETS to use compliance instruments from
either system (bilateral links). The linked systems can
adopt common compliance instruments. Or each system can
retain its own compliance instruments and accept those from
either ETS for compliance, possibly subject to restrictions.
A bilateral link offers three potential benefits. First, it
can make an ETS a viable policy option for a jurisdiction
where an independent ETS will be infeasible for technical or
cost reasons. Second, a bilateral link can reduce the total
cost of achieving the combined emissions caps of the linked
ETS. Third, a bilateral link can enhance the operation of
the market for the compliance instrument(s). Section one
gives background information. Section two presents the types
of links an ETS can establish and discusses the potential
benefits and risks of linking. The requirements for a
bilateral link between two ETS are summarized in section
three. How to implement a bilateral link is discussed in
section four.
Citation
“Partnership for Market Readiness. 2014. Lessons Learned from Linking Emissions Trading Systems : General Principles and Applications. Partnership for Market Readiness technical
papers;no. 7. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/21819 License: CC BY 3.0 IGO.”