COMING SOON: The ICAP Guide to Linking Emissions Trading Systems

An advantage of emissions trading is that these systems can be linked to one another to create a common carbon market. Creating bigger carbon markets with a common allowance price reduces the overall mitigation cost, increases market liquidity and creates an even playing field among regulated entities. There are already several linked markets operating around the world, including two in North America, a subnational link in Japan, as well as an upcoming link between the European Union and Switzerland. This Guide builds on the practical experiences with linking in order to identify practical lessons for policymakers working on emissions trading. 

Launching in September, the Guide offers a hands-on approach that goes through the whole process of linking from outlining the key benefits and risks of linking to potential pathways to implementing a link, as well as issues arising from differences in the linking partners' emissions trading systems. Following this, the Guide outlines common elements in a Linking Agreement and considers joint management and coordination structures that can help ensure the linked market runs smoothly.