Linking Policies When Tastes Differ: Global Climate Policy in a Heterogeneous World

The authors discuss linkage of various types of trading systems. Their goal is to identify opportunities for constructive linkage and policy choices that might limit or hinder linkage. They argue that the basic approach of existing emission-reduction-credit systems, especially the Clean Development Mechanism (CDM), can be extended to create linkage opportunities among diverse emission control systems while eliminating some of the problems in the CDM. Moreover, while emission-reduction-credit systems are designed to work with cap and trade, the authors describe how they might complement tax and certain regulatory systems, as well.

Gilbert E. Metcalf, Department of Economics, Tufts University and National Bureau of Economic Research; David Weisbach, University of Chicago Law School.