TY - JOUR A1 - Flachsland, Christian A1 - Marschinski, Robert A1 - Jakob, Michael T1 - Sectoral Linking of carbon markets: A trade-theory analysis T2 - Resource and Energy Economics N2 - The linking of emission trading systems (ETS) is a widely discussed policy option for future international cooperation on climate change. Benefits are expected from efficiency gains and the alleviation of concerns over competitiveness. However, from trade-theory it is known that due to general equilibrium effects and market distortions, linking may not always be beneficial for all participating countries. Following-up on this debate, we use a Ricardo-Viner type general equilibrium model to study the implications of sectoral linking on carbon emissions (‘leakage’), competitiveness, and welfare. By comparing pre- and post-linking equilibria, we show analytically how global emissions can increase if one of the ‘linked’ countries lacks an economy-wide emissions cap, although in case of a link across idiosyncratic sectors a decrease of emissions (‘anti-leakage’) is also possible. If – as a way to address concerns about competitiveness – a link between the EU ETS and a hypothetical US system is established, the partial emission coverage of the EU ETS can lead to the creation of new distortions between the non-covered domestic and international sector. Finally, we show how the welfare effect from linking can be decomposed into gains-from-trade and terms-of-trade contributions, and how the latter can make the overall effect ambiguous. KW - Linking KW - Emission trading KW - Trade theory KW - Competitiveness KW - Leakage Y1 - 2015 UR - https://opus4.kobv.de/opus4-hsog/frontdoor/index/index/docId/1738 SN - 1873-0221 VL - 34 IS - 4 SP - 585 EP - 606 PB - Elsevier CY - Mexico ER -