Back to OurEnergyLibrary search

Linking Carbon Markets with Different Initial Conditions

Linking Carbon Markets with Different Initial Conditions

Full Title: Linking Carbon Markets with Different Initial Conditions
Author(s): Dallas Burtraw, Clayton Munnings, Karen Palmer, and Matt Woerman
Publisher(s): Resources For the Future
Publication Date: July 1, 2017
Full Text: Download Resource
Description (excerpt):

Linkage of emissions trading systems theoretically minimizes total abatement costs by allowing fungibility of emissions reductions across jurisdictions. We develop a theoretical framework to investigate the implications of linking systems with unique designs. We qualitatively assess the California and the Regional Greenhouse Gas Initiative systems, which we find to be nearly ready to link despite some differences in their initial conditions, including design and stringency. We use a simulation model of regional electricity markets to investigate market outcomes under such a linked system. We consider possible exchange rates for allowances to adjust for differences in program stringency, and we examine how they interact with price floors and ceilings while explicitly representing other program features (e.g., leakage policies, companion policies, and allowance allocation). We find that aggregate emissions and emissions in each jurisdiction change in ways predicted by theory but that efficiency gains can be distributed in nuanced and nonintuitive ways.

All statements and/or propositions in discussion prompts are meant exclusively to stimulate discussion and do not represent the views of, its Partners, Topic Directors or Experts, nor of any individual or organization. Comments by and opinions of Expert participants are their own.

Sign up for our Press Release Distribution List

    Your Name (required)

    Your Email (required)

    Please sign me up to receive press releases from