Developing the North American carbon market: prospects for sustainable linking

Abstract

The Paris Agreement is certainly a diplomatic success and it blazes the trail for future global climate action. However, in order to achieve its target of keeping the global temperature increase significantly below 2°C, the Agreement has to be substantiated by more ambitious reduction targets and policies (UNFCCC 2016). Regional interlinked carbon markets provide a promising option to do so (Lerch 2016).Carbon markets, despite of some criticism, are still a valuable policy instrument. They minimize compliance costs and achieve pre-set targets accurately (Tietenberg 2006). They can be designed to fulfill ambitious criteria of sustainable development like environmental effectiveness, economic efficiency, and social justice (Rudolph et al. 2012). And the benefits of linking domestic carbon markets certainly dominate the concerns (Flachsland et al 2009, Ranson/Stavins 2015, Tuerk et al 2009. Not least, carbon markets have been spreading internationally across all governance levels (ICAP 2016).Sub-national policies are an important supplement to global and national measures. The New Environmental Federalism (Oates 2004, Rudolph/Morotomi 2016) objects to earlier warnings of a "race to the bottom" and underscores the value of sub-national regimes as policy laboratories;