Options and issues for restricted linking of emissions trading systems

This research paper explores 'restricted linking' as an alternative to full linking of emissions trading systems (ETSs), aiming to capture economic, political, and administrative benefits while mitigating risks related to regulatory autonomy and over-allocation.

• Linking emissions trading systems (ETSs) provides economic advantages, including better access to abatement options, reduced carbon leakage risks, improved market liquidity, and higher resilience to shocks. Politically, it can signal cooperation, reduce competitiveness concerns, and support more ambitious targets, while administratively it allows for shared costs and infrastructure. Such linking may be essential for smaller systems to meet their objectives.
• Full linking of ETSs presents significant challenges, including the need for harmonization and compromise on design elements, the risk of reduced ambition due to over-allocation of allowances in one jurisdiction, and a potential loss of regulatory autonomy. Additionally, jurisdictions may struggle with unequal technical and institutional capacities or conflicting domestic goals.
• The paper proposes 'restricted linking' as an alternative to full linking, which allows the flow of units between jurisdictions but applies constraints like quantity limits (quotas) or conditions such as exchange rates. The authors evaluate these options—including one-way linking, exchange rates, and discount rates—against not linking or full linking using a model based on economic benefit, environmental benefit, political feasibility, and other practical considerations.

APA

Stockholm Environment Institute (2015). Options and issues for restricted linking of emissions trading systems. https://www.sei.org/publications/options-and-issues-for-restricted-linking-of-emissions-trading-systems/

Chicago

Stockholm Environment Institute. Options and issues for restricted linking of emissions trading systems. 2015. https://www.sei.org/publications/options-and-issues-for-restricted-linking-of-emissions-trading-systems/.

Wikipedia

{{cite report |author=Stockholm Environment Institute |title=Options and issues for restricted linking of emissions trading systems |date=22 October 2015 |url=https://www.sei.org/publications/options-and-issues-for-restricted-linking-of-emissions-trading-systems/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{stockholmenvironmentinstitute2015options, author = {{Stockholm Environment Institute}}, title = {{Options and issues for restricted linking of emissions trading systems}}, institution = {Stockholm Environment Institute}, year = {2015}, month = oct, url = {https://www.sei.org/publications/options-and-issues-for-restricted-linking-of-emissions-trading-systems/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }