Is it feasible to link the European Union emissions trading system with the Californian cap-and-trade programme?

  • This paper examines the technical, legal and political feasibility of linking the European Union emissions trading system (EU ETS) with the Californian cap-and-trade programme (CAT). The technical feasibility of linking refers to the alignment of four key design features in the EU ETS and the CAT: (i) offset credits; (ii) price adjustment mechanisms (PAM); (iii) complementary climate and energy policies and (iv) monitoring, reporting and verification (MRV). Unless Europe and California can align their polar positions regarding land use, clearance and forestry (LULUCF) offsets and price floors, linking appears unlikely. There is also the question of how California’s Allowance Price Containment Reserve (APCR) and the EU’s proposed Market Stability Reserve (MSR) would function together in a linked scheme. Aligning the complementary climate and energy policies and MRV systems is less problematic, as harmonisation is not necessary. Regarding legal feasibility, it is unclear whether California, as a sub-national state, has the authority to negotiate and enter into a linked scheme with the EU. Politically, California may be reluctant to link with the EU, as this will lower both its allowance price and fiscal revenue. Furthermore, it could decrease the level of domestic investment and abatement. Assuaging California’s concerns rests heavily on the extent to which the proposed structural reforms to the EU ETS boost the allowance price. In the case of linking the EU ETS and the CAT, domestic policy objectives are more important than the cost-efficiency gains of linking. As such, establishing a partial link may be more feasible.

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Metadaten
Document Type:Master's Thesis
Language:English
Author(s):Marissa Santikarn
Referee:Mark DawsonORCiD
Contributing Corporation:Potsdam Institute for Climate Impact Research
Publisher:Hertie School of Governance
Place of Publisher:Berlin
Hertie Collections (Serial Number):Hertie School Student Paper Series (01/2014)
Publication year:2014
Publishing Institution:Hertie School
Granting Institution:Hertie School
Thesis date:2014/04/07
Number pages:66
Contributing Corporation:Potsdam Institute for Climate Impact Research
Release Date:2015/05/05
Confidentiality:0
Licence of document (German):CC BY-NC-SA 3.0
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