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 language | English |
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Article number | 102259 |
Number of pages | 25 |
Journal | Journal of Environmental Economics and Management |
Volume | 98 |
Early online date | 13 Sept 2019 |
DOIs | |
Publication status | Published - 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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Luca Taschini
- Business School - Chair in Climate Change Finance
- Accounting and Finance
- Centre for Business, Climate Change and Sustainability
- Climate Change and Sustainability
- Edinburgh Centre for Financial Innovations
Person: Academic: Research Active