Emissions trading systems with different price control mechanisms : implications for linking - Report for the Carbon Market Policy Dialogue

Abstract

This report was prepared to inform the Carbon Market Policy Dialogue (CMPD) between the European Commission, as the regulator of the EU Emissions Trading System, and the regulatory authorities for the emissions trading systems (ETSs) of California, Québec, China, New Zealand, and Switzerland. In this report, we propose a conceptual framework to characterise price control mechanisms (PCMs), i.e. the design features of emission trading systems (ETSs) meant to tackle price uncertainty. We present the PCM features of the six ETSs involved in the CMPD according to the conceptual framework and illustrate some insight from the scientific literature on linking ETSs with different PCMs. Finally, we discuss the main issues emerging from this report and provide out concluding remarks.