Emissions Trading Design
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Emissions Trading Design

A Critical Overview

Stefan E. Weishaar

Emissions trading is becoming an increasingly popular policy instrument with growing diversity in design. This book examines emissions trading design, emissions trading implementation problems and how to address them.
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Chapter 9: Linking emissions trading schemes

Stefan E. Weishaar


Over the last few decades global concerns about climate change have been intensifying, but only relatively recently have substantial efforts been made to address them. On the international level, the Kyoto Protocol of 1997 sought to forge a global climate alliance. While not succeeding in reducing the concentration of atmospheric greenhouse gas emissions, it gave rise to national and regional steps to curb GHG emissions in a cost-effective way by employing market-based instruments. One alternative approach to moving forward, and thus combat global warming, is to 'link' existing and future emissions trading systems without having to wait for countries to agree on a global climate change accord. 'Linking' is generally defined as a mechanism that allows market participants in one trading scheme to use emission rights issued under another trading scheme to meet domestic compliance obligations. Linking emissions trading schemes is expected to allow for a wider range of abatement opportunities and a larger market size, which stimulates liquidity and enables a more efficient allocation of resources. Despite the attention that 'linking' has received in the literature so far, there are very few studies of the legal issues and certainly not from a law and economics point of view, their focus being more on mapping legal barriers than on finding legal solutions. This chapter looks at the possibilities of expanding the benefits of an emissions trading system by linking it to other emissions trading systems.

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