Restricted Linking in Emissions Trading Systems: Options, Benefits, and Challenges

The document assesses the trade-offs between full and restricted linking of emissions trading systems (ETSs). While full linking provides economic and administrative benefits, it can compromise regulatory autonomy and overall ambition. The authors propose restricted linking—using quotas, exchange rates, or discount rates—as a way to avoid major pitfalls and provide adjustable levers for managing the risks of inter-jurisdictional unit flows.

• Linking emissions trading systems provides economic, political, and administrative advantages, but it also presents significant risks, including impacts on overall ambition, financial flows, investment patterns, and a loss of regulatory autonomy.
• Restricted linking options—specifically the use of quotas, exchange rates, or discount rates—do not provide the same benefits as full linking, but they prevent some of the primary risks and allow for adjustments if concerns become more significant.

APA

Stockholm Environment Institute (2017). Restricted Linking in Emissions Trading Systems: Options, Benefits, and Challenges. https://www.sei.org/publications/restricted-linking-emissions-trading-systems-options-benefits-challenges/

Chicago

Stockholm Environment Institute. Restricted Linking in Emissions Trading Systems: Options, Benefits, and Challenges. 2017. https://www.sei.org/publications/restricted-linking-emissions-trading-systems-options-benefits-challenges/.

Wikipedia

{{cite report |author=Stockholm Environment Institute |title=Restricted Linking in Emissions Trading Systems: Options, Benefits, and Challenges |date=10 July 2017 |url=https://www.sei.org/publications/restricted-linking-emissions-trading-systems-options-benefits-challenges/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{stockholmenvironmentinstitute2017restricted, author = {{Stockholm Environment Institute}}, title = {{Restricted Linking in Emissions Trading Systems: Options, Benefits, and Challenges}}, institution = {Stockholm Environment Institute}, year = {2017}, month = jul, url = {https://www.sei.org/publications/restricted-linking-emissions-trading-systems-options-benefits-challenges/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }