Emissions trading systems emerging in the United States offer the opportunity of a future trading link to the European carbon market. While such a link promises more efficient allocation of resources in a larger and more liquid market, differences in the design of trading systems can undermine the effectiveness of the linked trading systems. In a presentation at the European Parliament in Brussels, Belgium, Michael Mehling and Jason Anderson provided legislators and their staff with an update of recent policy developments in the US and identified the prospects of an eventual market link across the Atlantic. This presentation and a series of commissioned background studies helped brief EU parliamentarians visiting the US in 2009.

Drawing on the results of a study commissioned by the European Parliament’s Committee on the Environment, Public Health and Food Safety, both presenters gave a detailed overview of central legislation proposed during the 110th Congressand outlined the climate and energy agenda of the newly elected administration. They also provided an update of climate initiatives at the regional and state level, including the Regional Greenhouse Gas Initiative (RGGI) in the Northeast and mid-Atlantic, the Western Climate Initiative (WCI) on the West Coast, and the Midwest Regional Greenhouse Gas Reduction Accord (MGGA).

Attention then shifted to the most important legislative draft before the US Congress and key regional initiatives to assess central design features of a future US emissions trading system, such as allocation methods, cost containment provisions, rules on domestic and international offsets, and structures for market oversight and enforcement, with a view to their implications for a future transatlantic market link. Overall, few aspects of these trading systems risked being incompatible with the EU emissions trading system, although provisions on allowance borrowing, generous limits on offsets, and cost-containment provisions could deter agreement to a market link.

Following this presentation, the Ecologic Institute helped prepare and carry out a study visit in Washington DC for MEP Avril Doyle, the Parliament’s appointed rapporteur for the review of the EU emissions trading system, to meet key decision makers and advisors in the US climate process. An updated version of the original study commissione in October 2009 served to brief a delegation of EU Parliamentarians attending meetings in the US in preparation for the climate summit in Copenhagen.

The study [pdf, 1 MB, English] is available for download.