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

Climate Law, Vol 6, Nos 1-2, 2016, pp. 142-151.

Did the Paris Agreement provide a boost to carbon markets? Although spreading globally, relatively few links have been established between carbon markets so far. 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. There are significant challenges related to distribution of power and political feasibility involved in such linking processes. The Paris Agreement does not make the more intrinsic political linking challenges go away. Moreover, significant elaboration and clarification of the Paris Agreement remains subject to further negotiations. Nevertheless, Paris confirmed the increasing support to carbon markets: the periodic reviews of national climate policy, access to shared fulfilment, and a common guidance for accounting together provide a new momentum to 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.