Linking Emissions Trading Schemes: An Evaluation of the Potential for EU-South Korea Linkage

Emissions trading schemes have emerged as stable, if contested, components of a fragmented climate governance landscape. Yet the proliferation of emissions trading schemes has raised critical questions concerning the design of appropriate trading architectures to avoid the development of conflicting norms and, relatedly, fundamental considerations concerning how such schemes link to one another. This Working Paper engages with these concerns by advancing an incrementalist linkage framework based on a series of core convergence criteria to critically assess the compatibility of candidate partner schemes. It is suggested that the requirement of such core convergence criteria must be considered a prerequisite before the implementation of formal direct linkage. Linkage is conceptualised as a process rather than a single one-time event. For the EU, the search for a candidate linkage partner has often seemed a Sisyphean undertaking, but it is suggested that South Korea offers the prospect of stable climate settings with which the EU can negotiate. This Working Paper evaluates the critical design features of South Korea’s Emissions Trading Scheme (KETS) before applying core convergence criteria to evaluate the degree to which the design of the KETS provides scope for such direct linkage. This Working Paper recognises that there is a significant degree of alignment between the design features of the EU ETS and the KETS, but that there are also critical design features where more detailed discussion and negotiation will prove necessary. It is suggested that incremental alignment of key design features of the KETS and the EU ETS through a model of linkage by degrees provides a viable and durable pathway towards direct linkage. This Working Paper concludes by offering a perspective on how this analysis advances important insights into the prospects of direct linkage between the EU ETS and the KETS, the world’s two largest carbon emissions trading schemes.