MJIEL Vol 15 Iss 3 2018 - Article 2

Facilitating Linkage between/amongst Emissions Trading Systems via Free Trade Agreements?
Wen-chen Shih
ABSTRACT: Emissions trading have been widely used by countries, sub-national entities, and international organisations to reduce greenhouse gases (GHGs) emissions. Linking different emissions trading systems can improve market efficiency and reduce incidences of carbon leakage. Article 6 of the Paris Agreement contemplates a so-called ‘cooperative approach’ where-by Parties can voluntarily use the internationally transferred mitigation outcomes to achieve their respective nationally determined contribution. This brings out even more interests in linking emissions trading, or similar GHGs mitigation schemes between or amongst countries. What is the most appropriate legal instrument to establish, or to facilitate linkage? The most salient features of a linkage are mutual recognition of units issued by the respective national agencies in charge, regulatory harmonization regarding implementation and oversight, and institutional arrangement for consultation, information exchange and other collaborative works between or amongst the respective agencies in charge. Elements along the similar line are increasingly being negotiated and adopted by the so-called ‘new generation’ free trade agreements (FTAs) that seek to incorporate environmental and social safeguards. Can these new generation FTAs facilitate linkage between or amongst emissions trading systems in terms of providing a more established institutional underpinning for cross-border ‘trade’ in a very special kind of goods: emissions reduction units? This will be the central research question of this paper.

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