Prospects of linking the EU Emission Trading Scheme with a Federal US Emissions Trading Scheme along the lines of the Lieberman-Warner Proposal

The paper concludes that linking the EU ETS with a US scheme based on the Lieberman-Warner proposal is unlikely to be acceptable to the EU due to significant design differences. The Lieberman-Warner scheme is characterized as systematically less stringent, featuring weaker caps, lower auctioning levels, and extensive cost-containment measures. Such a link would likely result in the EU ceding control over its allowance prices and emissions implications to the US, while also undermining the EU's policy of excluding carbon sink credits.

• The Lieberman-Warner proposal is systematically less stringent than the EU ETS, which would likely lead to the EU making significant net purchases of allowances and experiencing wealth transfers to the US based on regulation rather than economic activity.
• Linking would cause the EU to lose control over its own carbon pricing and emissions outcomes because the Lieberman-Warner proposal's cost-containment measures are designed to keep prices within a specific range.
• The Lieberman-Warner scheme's use of cost-containment auctions would effectively increase the cap by borrowing from future budgets, potentially leading to an oversupply of allowances in the early years.
• The Lieberman-Warner proposal allows for significantly more temporal flexibility than the EU ETS, including unlimited banking and the ability to borrow up to 15% of compliance obligations from up to five years in the future.
• The EU's current legal mandate for linking is restricted to countries that have ratified the Kyoto Protocol, which excludes the USA; however, a 2008 European Commission proposal suggests removing this restriction for the post-2012 period.
• Because the USA has not ratified the Kyoto Protocol, transferring EU Allowances (which are equivalent to AAUs) to a US registry would risk double-counting or bring the EU into non-compliance unless a 'gateway mechanism' is used to strip and cancel the AAU property.
• The Lieberman-Warner proposal's comprehensive coverage—including upstream emissions from fuels and natural gas—would mean that price adjustments from linking would impact the entire US economy, including home heating and gasoline prices, potentially creating political opposition.

APA

Sterk, W. (2008). Prospects of linking the EU Emission Trading Scheme with a Federal US Emissions Trading Scheme along the lines of the Lieberman-Warner Proposal. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/working-paper-linking-3.pdf

Chicago

Sterk, Wolfgang. Prospects of linking the EU Emission Trading Scheme with a Federal US Emissions Trading Scheme along the lines of the Lieberman-Warner Proposal. Climate Strategies, 2008. https://climatestrategies.org/wp-content/uploads/2014/11/working-paper-linking-3.pdf.

Wikipedia

{{cite report |last1=Sterk |first1=Wolfgang |title=Prospects of linking the EU Emission Trading Scheme with a Federal US Emissions Trading Scheme along the lines of the Lieberman-Warner Proposal |publisher=Climate Strategies |date=September 2008 |url=https://climatestrategies.org/wp-content/uploads/2014/11/working-paper-linking-3.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sterk2008prospects, author = {Sterk, Wolfgang}, title = {{Prospects of linking the EU Emission Trading Scheme with a Federal US Emissions Trading Scheme along the lines of the Lieberman-Warner Proposal}}, institution = {Climate Strategies}, year = {2008}, month = sep, url = {https://climatestrategies.org/wp-content/uploads/2014/11/working-paper-linking-3.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }