EconPapers    
Economics at your fingertips  
 

Linking Permit Markets Multilaterally

Baran Doda and Simon Quemin

Working Papers from Chaire Economie du climat

Abstract: Linkages between emissions trading systems (ETSs) are crucial for the cost-effective implementation of the Paris Agreement. Yet we know little about the determinants of economic gains in a multilaterally linked system, how they are shared among participating jurisdictions and less still about their magnitude. We characterize these gains for an arbitrary linkage group, decompose them into gains in the group's internal bilateral linkages and prove linkage is superadditive. Relative to autarky linkage reduces permit price volatility on average but not necessarily for individual linkage group members. In a quantitative application calibrated to five hypothetical ETSs covering the power sectors in Canada, continental Europe, South Korea, the UK and the USA, linking generates gains of up to $370 million (constant 2005US$) per year relative to autarky. Focusing on linkage groups with two and three members which are themselves not linked, we find that maximum aggregate gains decline by $43-178 million.

Keywords: Climate change policy; International emissions trading systems; Multilateral linking; Effort and risk sharing (search for similar items in EconPapers)
JEL-codes: Q58 H23 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-env
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.chaireeconomieduclimat.org/RePEc/cec/wp ... -Quemin-Taschini.pdf First version, 2018 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cec:wpaper:1804

Access Statistics for this paper

More papers in Working Papers from Chaire Economie du climat
Bibliographic data for series maintained by Chaire Economie du Climat ().

 
Page updated 2019-04-19
Handle: RePEc:cec:wpaper:1804