Back to reports

Linking by Degrees
Incremental Alignment of Cap-and-Trade Markets

by Resources for the Future | April 2013

National and subnational economies have started implementing carbon-pricing systems unilaterally, from the bottom up. Linking these systems offers several potential benefits including enhancing cooperation among jurisdictions, enlarging the portfolio of options available for emissions reductions, and lowering overall costs.  

Linking by Degrees: Incremental Alignment of Cap-and-Trade Markets outlines a unique approach based on analysis that many of these benefits could be achieved through incremental alignment of climate policies across jurisdictions. In fact, such alignment might generally be a precondition for expanding the coordination that ultimately results in linking carbon markets.

Published in 2013 by Resources for the Future (RFF), this report has had broad and significant impact on carbon markets worldwide. Cited in 56 scholarly articles and reports, Linking by Degrees articulates an approach to linking carbon-pricing programs that has been embedded in national and subnational agreements and carbon markets, including the Paris Accord.

The research articulated opportunities for incremental alignment, such as:

  • Sharing best practices for measurement, reporting, and verification of emissions reductions
  • Learning and improving program design
  • Coordination of data collection and overall management of administrative costs

Steps in these directions build expertise within and trust between jurisdictions, enabling the possibility of linking.

The authors developed a 10-point matrix of elements in program design and applied that matrix to evaluate the readiness for linking between two existing trading programs in the Regional Greenhouse Gas Initiative (RGGI) and California. Overall, the authors observe these programs already are “linking by degrees” through cooperation and sharing of information, mutual learning, and borrowing from each other’s program design. Based on these observations, the report concludes RGGI and California are well positioned for linking with major alignment on many administrative measures – even in 2013 – the difference in allowance price is the only unresolved issue.