Carbon pricing is a necessary element in spurring climate change mitigation action. In this report it's argued that emissions trading, as an established and well recognised policy instrument for controlling greenhouse gas emissions, is increasingly popular and spreading around the world. As they develop, emissions trading systems should be designed so that they are compatible with each other. Aligning design elements early on will help improve the prospects of linking different systems in future and, therefore, maximise opportunities for cost-effective emissions reductions. As the world's oldest and largest market, the EU Emission Trading System will play a critical role in facilitating linking between different markets. Before it can do this, however, it must be seen as a credible market. The issue of surplus allowances must be addressed urgently and there should be moves to remove these from the system as soon as possible. Any new climate agreement must crucially allow parties to meet their Intended Nationally Determined Contribution's (INDCs) by transferring parts of their contributions to other parties and financing emissions reduction activities in other countries. The use of carbon markets will greatly improve the prospects of keeping global average temperatures below 2êC. Any agreement reached at the UNFCCC COP 21 in Paris at the end of 2015 should promote the use of carbon markets and facilitate the future linking of emissions trading systems. The UNFCCC could also play a critical role in providing basic standards including monitoring, reporting and verification.

Asia and the Pacific has achieved rapid economic expansion in the recent years and has become a major source of greenhouse gas (GHG) emissions. With more than half of the world’s population and high rates of economic growth, the region is especially vulnerable to the effects of climate change and therefore must play its part in cutting GHG emissions. The Paris Agreement adopted last December 2015 at the United Nations Framework Convention on Climate Change COP21 aims to restrict global warming to well below 2°C above preindustrial levels and to pursue efforts to reach 1.5°C---which is especially relevant to Asia and the Pacific region given its vulnerability. This knowledge product highlights how robust policies on emissions trading systems (ETS) can be important tools in reducing GHG emissions in a cost-effective manner, as well as supporting the mobilization of finance together with deployment of innovative technologies. There are currently 17 ETSs in place in four continents and account for nearly 40% of global gross domestic product. In Asia and the Pacific region, there are 11 systems operating, with more being planned. The growing wealth of experience on ETSs can be valuable to support DMCs that are planning and designing new systems of their own. This knowledge product summarizes some of the most significant learning experiences to date and discusses some of the solutions to alleviate challenges that have been faced. It also examines the possibilities for future linked carbon markets in the region.

This book focuses on the linking of the European Union Emissions Trading System (EU ETS) with other independent regional ETS. While rich practical and academic research has evolved on the economic and technical side of ETS linking, political drivers and barriers have so far been underrepresented in this debate. Filling this lacuna and based on international relations theory, existing research and qualitative fieldwork, this book introduces the range of political conditions that influence linking, such as political leadership and stakeholder activity. Specifically, it analyzes which of these aspects have played a role in three different linking activities of the EU: (1) a failed linking attempt: EU ETS–California Cap-and-Trade Program; (2) a successful linking treaty: EU ETS–Switzerland Emissions Trading System; and (3) an agreed-upon but not realized link: EU ETS–Australia Carbon Pricing Mechanism. Through an interrogation of these examples, Dr. Unger concludes that it is not only the technical challenges or the overall economic benefit but rather domestic interests, structural aspects, and external international political developments that have jointly dominated linking activities, especially those in which the EU takes part. This book will be of great interest to scholars and policy-makers working in climate policy and EU environmental politics.

The European Union's (EU) Emissions Trading Scheme (ETS) is a cornerstone of the EU's efforts to meet its obligation under the Kyoto Protocol. It covers more than 10,00 energy intensive facilities across the 27 EU Member countries; covered entities emit about 45% of the EU's carbon dioxide emissions. This book explores climate change which is generally viewed as a global issue, but proposed responses typically require action at the national level. With the 1997 Kyoto Protocol now in force and setting emissions objectives for 2008-2012, countries that ratified the protocol are developing appropriate implementation strategies to begin reducing their emissions of greenhouse gases. These objectives are discussed in detail in this book.

Carbon markets are developing and expanding around the world, but how and to what extent is their design shaped by learning and interaction between them? How do these markets function and what is the role of design? Carrying out a ground-breaking analysis of their design and diffusion, this book covers all the major carbon market systems and processes around the world: the EU, RGGI, California, Tokyo, New Zealand, Australia, China, South Korea and Kazakhstan. It offers a systematic, in-depth discussion and comparison of the key design features in these systems with expert contributors exploring how, and to what extent, these features have been shaped by central policy diffusion mechanisms and domestic politics. By focussing on the specific design features of the instruments used, this volume makes important contributions to diffusion theory, highlighting how ETS diffusion processes more often have resulted in design divergence than convergence, and discussing the implications of this finding for the vision of linked systems in the post-Paris era. It will be of significant interest to a broad audience interested in the emergence, evolution, functioning and interaction of carbon markets.