Linked Carbon Markets: Silver Bullet, or Castle in the Air?

In: Climate Law
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  • 1 Fridtjof Nansen Institute
  • 2 Fridtjof Nansen Institute

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Does the Paris Agreement provide a boost to carbon markets? Although carbon markets are spreading globally, so far relatively few links have been established between them. The history of linking indicates that successful efforts are characterized by converging ets design, and, related to this, political will. Moreover, existing links have been facilitated by prior economic and political ties. Such linking processes face significant challenges related to distribution of power and political feasibility. The Paris Agreement does not make the more intrinsic challenges of political linking go away. Moreover, a significant amount of elaboration and clarification of the Paris Agreement remains subject to further negotiations. Nevertheless, Paris confirmed an increasing support for carbon markets: the periodic reviews of state climate policies, shared fulfilment, and common guidance for accounting, together provide a new momentum for the development of carbon markets and the process of linking them. What this boost means for the prospects of a globally interlinked carbon market remains to be seen.

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     See D. G. Victor, ‘Fragmented Carbon Markets and Reluctant Nations: Implications for the Design of Effective Architectures’, in Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, edited by J. Aldy and R. Stavins (Cambridge, uk: Cambridge University Press, 2007), at 133–60; J. Jaffe and R. N. Stavins, ‘Linkage of Tradable Permit Systems in International Climate Policy Architecture’, Faculty Research Working Papers Series, John F. Kennedy School of Government, Harvard University (2008); and David A. Weisbach and Gilbert E. Metcalf, ‘Linking Policies When Tastes Differ: Global Climate Policy in a Heterogeneous World’, 6 Review of Environmental Economics and Policy (2012), at 110.

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