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Transitional restricted linkage between emissions trading schemes

Quemin, Simon and de Perthius, Christian (2018) Transitional restricted linkage between emissions trading schemes. Environmental and Resource Economics. ISSN 0924-6460

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Identification Number: 10.1007/s10640-018-00307-6

Abstract

Linkages between Emissions Trading Systems are deemed an important element of the future climate policy landscape. They are, however, difficult to agree and remain few and far between. Temporary restrictions on permit trading have potential to facilitate and gradually approach unrestricted, full linkage. We compare the relative merits of several link restrictions in this respect, namely quantitative transfer limits, border taxes on transfers, exchange and discount rates, and unilateral linkage. To this end, we develop a simple model to have a unifying framework which, in conjunction with lessons we draw from realworld experiences, serves as a basis for a broader, policy-oriented discussion. While quantitative restrictions seem to be the natural route to full linkage, they can lead to uncertain distributional effects and weaken price signals. These aspects are mitigated under a border permit tax, but this policy seems harder to implement. Exchange rates have potential to adjust for programmes’ stringencies and raise ambition over time, but can be challenging to select. As experience corroborates, unilateral linkage can be a convenient approach.

Item Type: Article
Official URL: https://link.springer.com/journal/10640
Additional Information: © 2018 The Authors
Divisions: Grantham Research Institute
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HF Commerce
JEL classification: F - International Economics > F1 - Trade > F15 - Economic Integration
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy
Sets: Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Date Deposited: 07 Jan 2019 10:58
Last Modified: 20 Feb 2019 06:58
URI: http://eprints.lse.ac.uk/id/eprint/91522

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