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Discussion Papers no. 883

Martin L. Weitzman and Bjart Holtsmark

On the effects of linking voluntary cap-and-trade systems for CO2 emissions

Linkage of cap-and-trade systems is typically advocated by economists on a general analogy with the beneficial linking of free-trade areas and on the specific grounds that linkage will ensure cost effectiveness among the linked jurisdictions.

An appropriate and widely accepted specification for the damages of carbon dioxide (CO2) emissions within a relatively short (say 5-10 year) period is that marginal damages for each jurisdiction are constant (although they can differ among jurisdictions). With this defensible assumption, the analysis is significantly clarified and yields simple closedform expressions for all CO2 permit prices. Some implications for linked and unlinked voluntary CO2 cap-and-trade systems are derived and discussed.

About the publication


On the effects of linking voluntary cap-and-trade systems for CO2 emissions. Martin L. Weitzman and Bjart Holtsmark

Series and number

Discussion Papers no. 883


Statistisk sentralbyrå


Discussion Papers



Number of pages


About Discussion Papers

Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.