Linking by Degrees: Incremental Alignment of Cap-and-Trade Markets

Dallas Burtraw, Karen Palmer, Clayton Munnings (), Paige Weber and Matt Woerman
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Clayton Munnings: Resources for the Future

RFF Working Paper Series from Resources for the Future

Abstract: National and subnational economies have started implementing carbon pricing systems unilaterally, from the bottom up. Therefore, the potential linking of individual cap-and-trade programs to capture efficiency gains and other benefits is of keen interest. This paper introduces a two-tiered framework to guide policymakers, with an interest in North American policy outcomes. One tier discusses program elements that need to be aligned before trading of allowances across programs can occur. The second identifies benefits of incremental alignment of program elements even prior to trading between programs—which we call “linking by degrees.” We apply this framework to California’s cap-and-trade program and the Regional Greenhouse Gas Initiative. These programs are already linking through cooperation and sharing of information. Many aspects of the program designs are ready for the exchange of allowances within a common market; however, the difference in allowance prices remains an issue to be considered before formal linking could occur.

Keywords: greenhouse gas; climate change; climate policy; policy coordination (search for similar items in EconPapers)
JEL-codes: H77 Q58 (search for similar items in EconPapers)
Date: 2013-04-05
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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Citations: View citations in EconPapers (33)

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