TOWARDS A GLOBAL CARBON MARKET

The report examines the feasibility of linking the EU ETS with various global carbon markets, highlighting that success depends on harmonizing design features such as target stringency, offset rules, and price controls. It analyzes the successful California-Quebec linkage and the failed EU-Australia attempt, while evaluating the compatibility of the EU ETS with markets in Switzerland, China, South Korea, New Zealand, Kazakhstan, and the US RGGI. The author recommends that the EU ETS adopt safeguards used elsewhere, such as auction floor prices and banking limits, to address oversupply and price volatility.

• Linking carbon markets can increase the pool of mitigation options and reduce costs, but these benefits only occur if the linked markets share similar ambition levels and design features regarding price controls, offset restrictions, and allocation methods.
• The linkage between California and Quebec is cited as a successful model because both jurisdictions had similar policy designs prior to linking in 2013 through the Western Climate Initiative and utilized carbon pricing as a support measure alongside other climate policies.
• The EU ETS is currently negotiating a link with Switzerland, which is the first formal process to link the EU ETS with a third country's market. Switzerland has increased compatibility by moving from a voluntary to a mandatory scheme as of 1 January 2013 and aligning its 2020 target with the EU's 20% reduction goal.
• Linking the EU ETS with China's future national carbon market is considered unlikely in the near term due to China's lack of an absolute emissions cap, lower ambition levels, and the use of forest sink offsets which are prohibited in the EU ETS.
• South Korea's ETS, which began in 2015, presents potential for linkage due to expected high carbon prices, but significant barriers remain regarding the government's discretionary power to intervene in the market and the use of carbon capture and storage (CCS) offsets.
• Linking with the New Zealand ETS is deemed virtually impossible because the system lacks a total emissions cap, utilizes a 'two for one' surrender obligation, and includes forestry as both a source of allowances and a point of obligation.
• The US Regional Greenhouse Gas Initiative (RGGI) is incompatible with the EU ETS primarily due to its narrow sectoral coverage (power sector only), its use of a price corridor (floor and ceiling), and the ability of member states to easily opt-in or opt-out.
• The attempt to link the EU ETS and the Australian Carbon Pricing Mechanism failed in 2013 after a change in the Australian government led to the total abolition of carbon pricing.
• The report recommends that the EU ETS adopt specific safeguards from other markets to prevent allowance oversupply and price crashes, including auction floor prices and holding limits on banked allowances.

APA

Carbon Market Watch (2015). TOWARDS A GLOBAL CARBON MARKET. https://carbonmarketwatch.org/wp-content/uploads/2015/05/NC-Towards-a-global-carbon-market-report_web.pdf

Chicago

Carbon Market Watch. TOWARDS A GLOBAL CARBON MARKET. 2015. https://carbonmarketwatch.org/wp-content/uploads/2015/05/NC-Towards-a-global-carbon-market-report_web.pdf.

Wikipedia

{{cite report |author=Carbon Market Watch |title=TOWARDS A GLOBAL CARBON MARKET |date=May 2015 |url=https://carbonmarketwatch.org/wp-content/uploads/2015/05/NC-Towards-a-global-carbon-market-report_web.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{carbonmarketwatch2015towards, author = {{Carbon Market Watch}}, title = {{TOWARDS A GLOBAL CARBON MARKET}}, institution = {Carbon Market Watch}, year = {2015}, month = may, url = {https://carbonmarketwatch.org/wp-content/uploads/2015/05/NC-Towards-a-global-carbon-market-report_web.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }