Barriers and options for carbon market integration

Abstract

Carbon market is one of the key elements under UN climate change negotiation. In Asia and the Pacific, a number of leading countries are integrating carbon trading systems into their national climate change policies. The creation of carbon market at either regional or global level is advocated as a cost-effective and flexible means to meet emission reduction targets. This chapter assesses the prospect of regional carbon market integration through linking emission trading systems (ETSs) in Asia and the Pacific; analyzes the barriers to face, and recommend the options for linking of ETSs. The main barriers are related to differences on design features among systems and different political desirability. The chapter concludes that carbon market integration is positive in long-term, however it would face great challenges in short-term. To facilitate ETS linkage, the chapter recommends that policy-makers address those main barriers for linking in early design stage of an ETS.