ABSTRACT
The Emissions Trading System (ETS) of the European Union (EU) involves the largest carbon trading market in the world, with a turnover of some 90 billion euro in 2010 (Skjærseth and Wettestad 2008, 2010). But the challenge of climate change is fundamentally global, with most emissions emanating outside the EU. Hence mitigation measures should ideally have a global reach and create a level global economic playing field. Over time, the EU ETS has been complemented by similar initiatives around the globe. Linkage between emissions trading systems can enable participants in one system to use units from another system for compliance purposes (Commission and Combet 2012). This makes the international linking of carbon markets a key challenge in global climate policy (see e.g., Ellis and Tirpak 2006; Jaffe and Stavins 2008; Tuerk et al. 2009; Flachsland et al. 2009; Metcalf and Weisbach 2010; Zetterberg 2012).
