"A Wave of the Future: International Linkage of Carbon Markets"
December 5, 2011
Author: Robert N. Stavins, Albert Pratt Professor of Business and Government; Member of the Board; Director, Harvard Project on Climate Agreements
Belfer Center Programs or Projects: Harvard Project on Climate Agreements
Despite the demise in the United States Senate last year of serious consideration of an economy-wide U.S. cap-and-trade system for CO2 emissions, a major cap-and-trade system for greenhouse gas (GHG) emissions is in place in the European Union; similar systems are in place or under development in New Zealand, California, and several Canadian provinces; systems are being considered at the national level in Australia, Canada, and Japan; and a global emission reduction credit scheme — the Clean Development Mechanism (CDM) — has an enthusiastic and important constituency of supporters in the form of the world’s developing countries.
So, despite the fact that there has been an undeniable loss of momentum, it remains true that cap-and-trade is still the most likely domestic policy approach for CO2 emissions reductions throughout the industrialised world, given the rather unattractive set of available alternative approaches. This makes it important to think about the possibility of linking these national and regional cap-and-trade systems in the future. Such linking occurs when the government that maintains one system allows regulated entities to use allowances or credits from other systems to meet compliance obligations....
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