Menu Expand

Linking Cap-and-Trade Systems and Green Finance

  1. Journals
  2. Economics, Finance, Business & Management
  3. Vierteljahrshefte zur Wirtschaftsforschung
  4. Vol. 88, Issue 2
  5. pp. 89–100

JOURNAL ARTICLE

Cite JOURNAL ARTICLE

Style
Erdmann, K., Zaklan, A., Kemfert, C. Linking Cap-and-Trade Systems and Green Finance. Vierteljahrshefte zur Wirtschaftsforschung, 88(2), 89-100. https://doi.org/10.3790/vjh.88.2.89
Erdmann, Katharina; Zaklan, Aleksandar and Kemfert, Claudia "Linking Cap-and-Trade Systems and Green Finance" Vierteljahrshefte zur Wirtschaftsforschung 88.2, , 89-100. https://doi.org/10.3790/vjh.88.2.89
Erdmann, Katharina/Zaklan, Aleksandar/Kemfert, Claudia: Linking Cap-and-Trade Systems and Green Finance, in: Vierteljahrshefte zur Wirtschaftsforschung, vol. 88, iss. 2, 89-100, [online] https://doi.org/10.3790/vjh.88.2.89
Format
Download

Linking Cap-and-Trade Systems and Green Finance

Erdmann, Katharina | Zaklan, Aleksandar | Kemfert, Claudia

Vierteljahrshefte zur Wirtschaftsforschung, Vol. 88 (2019), Iss. 2 : pp. 89–100

1 Citations (CrossRef)

Read Now Download (PDF)

Additional Information

Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/vjh.88.2.89
Language
English
Pages
12
Keywords

Author Details

Katharina Erdmann, FU Berlin and DIW Berlin, kerdmann@diw.de

Aleksandar Zaklan, DIW Berlin, azaklan@diw.de

Claudia Kemfert, DIW Berlin and Hertie School of Governance, sekretariat-evu@diw.de

Cited By

  1. A Linkage Framework for the China National Emission Trading System (CETS): Insight from Key Global Carbon Markets

    Pan, Chunyu

    Shrestha, Anil Kumar

    Wang, Guangyu

    Innes, John L.

    Wang, Kevin Xinwei

    Li, Nuyun

    Li, Jinliang

    He, Yeyun

    Sheng, Chunguang

    Niles, John-O.

    Sustainability, Vol. 13 (2021), Iss. 13 P.7459

    https://doi.org/10.3390/su13137459 [Citations: 9]

References

  1. Anger, N. (2008): Emissions trading beyond Europe: Linking schemes in a post-Kyoto world. Energy Economics, 30 (4), 2028 – 2049.  Google Scholar
  2. BAFU – Bundesamt für Umwelt (2019): Linking the Swiss and EU emissions trading schemes. https://www.bafu.admin.ch/bafu/en/home/topics/climate/info-specialists/climate-policy/emissions-trading/linking-the-swiss-and-eu-emissions-trading-schemes.html (accessed: 15 May 2019).  Google Scholar
  3. Brinkman, M. (2009): Incentivizing Private Investment in Climate Change Mitigation. In: Stewart, R. B., B. Kingsbury, and B. Rudyk (2009), Climate Finance: Regulatory and Funding Strategies for Climate Change and Global Development, New York: NYU Press.  Google Scholar
  4. California Air Resources Board (2017): Linkage. https://www.arb.ca.gov/cc/capandtrade/linkage/linkage.htm (accessed: 15 May 2019).  Google Scholar
  5. California Air Resources Board (2018a): California, Québec and Ontario release results for first three-way joint cap-and-trade auction. https://ww2.arb.ca.gov/news/california-quebec-and-ontario-release-results-first-three-way-joint-cap-and-trade-auction (accessed: 15 May 2019).  Google Scholar
  6. California Air Resources Board (2018b): Archived Auction Information and Results. https://www.arb.ca.gov/cc/capandtrade/auction/auction_archive.html (accessed: 10 March 2019).  Google Scholar
  7. California Air Resources Board (2019): Auction Notice. https://www.arb.ca.gov/cc/capandtrade/auction/feb-2019/notice.pdf (accessed: 15 May 2019).  Google Scholar
  8. Carbone, J. C., C. Helm, and T. F. Rutherford, (2009): The case for international emission trade in the absence of cooperative climate policy. Journal of Environmental Economics and Management, 58 (3), 266 – 280.  Google Scholar
  9. Carbon Pulse (2019a): Oregon ETS linkage may not occur at 2021 start date-senator. https://carbon-pulse.com/70184/ (accessed: 15 May 2019).  Google Scholar
  10. Carbon Pulse (2019b): Ontario “closes book” on cap-and-trade, refunding a fraction of allowance purchases. https://carbon-pulse.com/71661/ (accessed: 15 May 2015).  Google Scholar
  11. Cramton, P., A. Ockenfels, and S. Stoft (2015): An international carbon-price commitment promotes cooperation. Economics of Energy & Environmental Policy, 4 (2), 51 – 64.  Google Scholar
  12. Doda, B., and L. Taschini (2017): Carbon Dating: When Is It Beneficial to Link ETSs? Journal of the Association of Environmental and Resource Economists, 4 (3), 701 – 730.  Google Scholar
  13. EFK – Eidgenössische Finanzaufsicht (2017): Evaluation der Lenkungswirkung des Emissionshandelssystems.  Google Scholar
  14. European Commission (2017a): Proposal for a Council decision on the conclusion, on behalf of the European Union, of an Agreement between the European Union and the Swiss Confederation on the Linking of their Greenhouse Gas Emissions Trading Systems.  Google Scholar
  15. European Commission (2017b): EU and Switzerland sign agreement to sign emission trading systems. https://ec.europa.eu/clima/news/eu-and-switzerland-sign-agreement-link-emissions-trading-systems_en (accessed: 15 May 2019).  Google Scholar
  16. European Commission (2018): Report on the functioning of the European carbon market. COM(2018) 842 final.  Google Scholar
  17. European Commission (2019): Climate Action – Auctioning of Allowances: https://ec.europa.eu/clima/policies/ets/auctioning_en.  Google Scholar
  18. European Union (2003): Directive 2003/87/EC of the European Parliament and of the Council. Official Journal of the European Union.  Google Scholar
  19. European Union (2017): Agreement between the European Union and the Swiss Confederation on the linking of their greenhouse gas emissions trading systems.  Google Scholar
  20. Flachsland, C., R. Edenhofer, and O. Marschinksi, (2009): To link or not to link. Benefits and disadvantages of linking cap-and-trade systems. Climate Policy, 9 (4), 358 – 372.  Google Scholar
  21. Green, J., T. Sterner, and G. Wagner (2014): A balance of bottom-up and top-down in linking climate policies. Nature Climate Change, 4, 1064 – 1067.  Google Scholar
  22. Green, J. F., T. Sterner, and G. Wagner (2014): The Politics of Market Linkages: Linking Domestic Climate Policies with International Political Economy. Fondazione Eni Enrico Mattei Working Papers, 964.  Google Scholar
  23. Hahn, R. W. (1984): Market Power and Transferable Property Rights. The Quarterly Journal of Economics, 99 (4), 753 – 765.  Google Scholar
  24. ICAP – International Carbon Action Partnership (2018): ETS Map. https://icapcarbonaction.com/en/ets-map (accessed: 19 June 2018).  Google Scholar
  25. IPCC – Intergovernmental Panel on Climate Change (2014): Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.  Google Scholar
  26. IPCC – Intergovernmental Panel on Climate Change (2018): Special Report: Global Warming of 1.5º C.  Google Scholar
  27. Kalaitzoglou, I. A., and B. M. Ibrahim (2015): Liquidity and resolution of uncertainty in the European carbon futures market. International Review of Financial Analysis, 37, 89 – 102.  Google Scholar
  28. Liski, M. (2001): Thin versus Thick CO2 Market. Journal of Environmental Economics and Management, 41 (3), 295 – 311.  Google Scholar
  29. McKibbin, W., A. Morris, and P. Wilcoxen, (2008): Expecting the Unexpected: Macroeconomic Volatility and Climate Policy. Discussion Paper, 08 – 16, Harvard Project on Climate Agreements, Belfer Center.  Google Scholar
  30. MDDELECC – Ministère du Développement durable, de l’Environnement et de la Lutte contre les changements climatiques (2018): The Carbon Market. The Québec Cap and Trade System for Greenhouse Gas Emissions Allowances. http://www.mddelcc.gouv.qc.ca/changements/carbone/Systeme-plafonnement-droits-GES-en.htm (accessed 10 March 2019).  Google Scholar
  31. Mol, A .P. J. (2012): Carbon flows, financial markets and climate change mitigation. Environmental Development, 1(1), pp. 10 – 24.  Google Scholar
  32. Nova Scotia (2018): Nova Scotia′s Cap and Trade System: Regulatory Framework.  Google Scholar
  33. Oberauner, I. M., and F. Krysiak (2008): Nutzen und Kosten einer klimapolitischen Kooperation zwischen der Schweiz und der EU. WWZ Forschungsbericht. 02/08.  Google Scholar
  34. Ontario (2016): Ontario Working with Québec and Mexico to Advance Carbon Markets. https://news.ontario.ca/opo/en/2016/08/ontario-working-with-quebec-and-mexico-to-advance-carbon-markets.html (accessed: 15 May 2019).  Google Scholar
  35. Purdon, M., D. Houle, and E. Lachapelle, (2014): The Political Economy of California and Québec’s Cap-and-Trade Systems. Research Report.  Google Scholar
  36. Ranson, M., and R. N. Stavins (2016): Linkage of greenhouse gas emissions trading systems. Learning from experience. Climate Policy, 16(3), 284 – 300.  Google Scholar
  37. State of California (2017): California, Quebec and Ontario sign agreement to link carbon markets. https://www.gov.ca.gov/2017/09/22/news19963/ (accessed: 15 May 2019).  Google Scholar
  38. Sterk, W., and R. Stuele, (2009): Advancing the climate regime through linking domestic emission trading systems? Mitigation and Adaption Strategies for Global Change, 14 (5), 409 – 431.  Google Scholar
  39. Stern, N. (2007): The Stern Review: The Economics of Climate Change. Cambridge: Cambridge University Press.  Google Scholar
  40. Tuerk, A., M. Mehling, C. Flachsland, and W. Sterk, (2009): Linking Carbon Markets: Concepts, Case Studies and Pathways. Climate Policy, 9 (4), 341 – 357.  Google Scholar
  41. UNEP DTU (2019): CDM projects by host region. http://www.cdmpipeline.org/cdm-projects-region.htm#1 (accessed: 15 May 2019).  Google Scholar
  42. United Nations (2015): Treaty Collection. Chapter XXVII. Environment.  Google Scholar
  43. WCI – Western Climate Initiative (2013): History. http://www.westernclimateinitiative.org/history (accessed: 15 May 2019).  Google Scholar
  44. WCI – Western Climate Initiative (2017a): Western Climate Initiative, Inc. http://www.wci-inc.org/ (accessed: 15 May 2019).  Google Scholar
  45. WCI – Western Climate Initiative (2017b): Program Design. http://www.wci-inc.org/program-design.php (accessed: 15 May 2019).  Google Scholar
  46. Weitzman, M. L. (2015): Internalizing the Climate Externality: Can a Uniform Price Commitment Help? Economics of Energy & Environmental Policy, 4 (2), 37 – 50.  Google Scholar
  47. Wiener, J. B. (1999): Global Environmental Regulation: Instrument Choice in Legal Context. The Yale Law Journal, 108, 677 – 800.  Google Scholar
  48. World Bank (2014): Lessons Learned from Linking Emissions Trading Systems: General Principles and Applications. Partnership for Market Readiness Technical Papers.  Google Scholar

Abstract

Summary: Linking of two or more cap-and-trade systems promises gains in cost effectiveness and signals a strong commitment to carbon policy. Linking is also seen as one possible way of converging from regional climate policy initiatives toward a global climate policy architecture. Moreover, linking may be used to direct investment into low-carbon technology – one form of green finance – to low-abatement cost locations. Two linked systems have been established recently, one in Europe and one in North America. However, linking also comes with challenges, such as increased exposure to shocks originating in other parts of the linked system and a greater need for policy coordination. We first consider the benefits and challenges of linking conceptually, including its incentives for green financial flows. We then present some of the main features of the European and North American linked systems and outline the process that led to their establishment. Finally, we consider preliminary evidence on the workings of each linked system. We conclude that from a green finance perspective linking should be viewed as a long-term option.

Table of Contents

Section Title Page Action Price
Katharina Erdmann, Aleksandar Zaklan, and Claudia Kemfert: Linking Cap-and-Trade Systems and Green Finance 89
Summary 89
Zusammenfassung 89
1 Introduction 90
2 The Concept of Linking Cap-and-Trade Schemes 91
2.1 Advantages of Linking: Greater Cost Effectiveness and Policy Commitment 91
2.2 Challenges of Linking: Price Risk Shocks and Need for Policy Coordination 92
3 Linking and Green Finance 93
3.1 Linking May Encourage Green Finance 93
3.2 Distributional Aspects 94
4 Linking in Practice 94
4.1 EU ETS and CH ETS 94
4.2 The North American Carbon Market 95
5 Preliminary Evidence on the Workings of Linking 96
5.1 The European Case 96
5.2 Linking in North America 97
6 Conclusion 97
References 89

Contact

Duncker & Humblot GmbH Carl-Heinrich-Becker-Weg 9 12165 Berlin, Deutschland T: +49 30 790006-0

Quick Navigation

2024 Duncker & Humblot GmbH

Powered by CloudPublish

We use cookies to ensure that you get the best experience on our website. Learn more about how we use cookies.