Advancing Linked Carbon Pricing Instruments

The report explores how jurisdictions can cooperate through 'carbon pricing clubs' to link carbon pricing instruments (CPIs) and reduce emissions cost-effectively. By analyzing non-climate institutions—specifically APEC, MTCR, OECD, and IFTA—the authors identify key governance dimensions: membership rules, decision-making processes, and compliance mechanisms. The report argues that 'hard coordination' and exclusive membership are essential for maintaining environmental integrity, while centralized secretariats can reduce administrative burdens and facilitate technical alignment. It concludes that a combination of strict accession criteria, peer-review processes, and flexible decision-making (such as majority voting) can help clubs adapt to changing political and economic circumstances while safeguarding their environmental goals.

• Linking carbon pricing instruments (CPIs) can significantly increase climate mitigation, with estimates suggesting that linked carbon markets could achieve nearly twice the emission reductions of existing policies at the same cost.
• The primary motivation for establishing carbon pricing clubs is to achieve efficiency gains and lower compliance costs for meeting mitigation targets, which may in turn encourage higher overall mitigation ambition.
• Environmental integrity is a critical challenge for carbon pricing clubs, requiring the development of harmonized or reciprocal standards to ensure that international transfers of units are robust and that targets are comparable.
• Exclusive membership acts as a driver for cooperation and compliance, as it ensures that benefits are reserved for members and allows the group to act as a gatekeeper for the club's integrity.
• Analysis of non-climate institutions shows that homogeneity in shared values and commitment to goals is more important for cooperation than the specific type of jurisdiction (e.g., national vs. subnational).
• Centralized secretariats provide essential support by pooling resources for technical analysis, research, and administrative tasks, which creates economies of scale and reduces the burden on individual members.
• While many international organizations rely on consensus, voting rules (such as the two-thirds majority used by IFTA) can be an effective alternative for decision-making and reforming agreements without requiring total unanimity.
• Peer-review and audit mechanisms are effective 'carrots' for promoting compliance and building trust, offering a less intrusive alternative to formal enforcement 'sticks' that might infringe on national sovereignty.
• Formal enforcement mechanisms, such as the ability to expel members or revoke licenses, are typically developed over time and are most common in institutions where non-compliance poses high financial risks to other members.
• To maintain the integrity of a club as it grows, membership conditions and accession processes must evolve over time to reflect the maturity of the institution and new expectations for members.

APA

Gagnon-Lebrun, F., Gass, P., Allan, J., Echeverría, D., Oharenko, Y., & Touchette, Y. (2018). Advancing Linked Carbon Pricing Instruments. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/carbon-pricing-instruments.pdf

Chicago

Gagnon-Lebrun, Frédéric, Philip Gass, Jennifer Allan, Daniella Echeverría, Yuliia Oharenko, and Yanick Touchette. Advancing Linked Carbon Pricing Instruments. International Institute for Sustainable Development, 2018. https://www.iisd.org/system/files/publications/carbon-pricing-instruments.pdf.

Wikipedia

{{cite report |last1=Gagnon-Lebrun |first1=Frédéric |last2=Gass |first2=Philip |last3=Allan |first3=Jennifer |last4=Echeverría |first4=Daniella |last5=Oharenko |first5=Yuliia |last6=Touchette |first6=Yanick |title=Advancing Linked Carbon Pricing Instruments |publisher=International Institute for Sustainable Development |date=September 2018 |url=https://www.iisd.org/system/files/publications/carbon-pricing-instruments.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gagnonlebrun2018advancing, author = {Gagnon-Lebrun, Frédéric and Gass, Philip and Allan, Jennifer and Echeverría, Daniella and Oharenko, Yuliia and Touchette, Yanick}, title = {{Advancing Linked Carbon Pricing Instruments}}, institution = {International Institute for Sustainable Development}, year = {2018}, month = sep, url = {https://www.iisd.org/system/files/publications/carbon-pricing-instruments.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }