Linking permit markets multilaterally

Baran Doda, Simon Quemin, Luca Taschini

Research output: Contribution to journalArticlepeer-review

Abstract

We formally study the determinants, magnitude and distribution of efficiency gains generated in multilateral linkages between permit markets. We provide two novel decomposition results for these gains, characterize individual preferences over linking groups and show that our results are largely unaltered with strategic domestic emissions cap selection or when banking and borrowing are allowed. Using the Paris Agreement pledges and power sector emissions data of five countries which all use or considered using both emissions trading and linking, we quantify the efficiency gains. We find that the computed gains can be sizable and are split roughly equally between effort and risk sharing.
Original languageEnglish
Article number102259
Number of pages25
JournalJournal of Environmental Economics and Management
Volume98
Early online date13 Sept 2019
DOIs
Publication statusPublished - Nov 2019

Keywords / Materials (for Non-textual outputs)

  • climate change policy
  • international emissions trading systems
  • multilateral linking
  • effort sharing
  • risk sharing

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