Since the launch of the European Union Emission trading Scheme (EU ETS) in 2005 many regions worldwide decided to follow this approach and have implemented trading schemes to cap greenhouse gas emissions. With the implementation of emission trading emerges the idea of connecting or ‘linking’ two or more emission trading schemes (ETSs) to each other. From a theoretical perspective, linking to similar schemes is the most logical step for emerging regional ETSs, because a larger carbon market creates more cost efficient mitigation opportunities and finally reduces the overall emission reduction costs. But fact is, that until today linking, as ‘the mutual recognition of emission rights for compliance’, has been realized only on very few occasions.
This thesis tackles the question why most existing ETSs are reluctant to link with each other at the current moment. The academic discussion shows that although some difficulties when certain features of the technical design of emission trading schemes have to be aligned, the economic benefits of linking persist. For this reason this thesis emphasizes on the political barriers to linking and treats economic and technical aspects with less detail.
It aims to compile a conceptual framework which integrates economic, political (legal and environmental) and technical variables that impact the decision to link ETSs. The framework is designed as a tool for policy makers and analysts who wish to investigate concrete cases of prospective linkages between systems. In the practical part of this work the tool is applied to two possible linkages.