Obstacles to linking emissions trading systems in the EU and China: A comparative law and economics perspective

With the U.S. retreat on climate efforts, EU officials are already looking to China, expecting an ‘expanded carbon market’ to reinforce EU’s global climate leadership. Meanwhile, China has shown growing interests in gaining a more prominent role in the global climate governance, and linking the China Emissions Trading System (ETS) to the world’s first ETS will largely serve that goal. Admittedly, linking the China ETS to the EU ETS could bring considerable economic, environmental and political gains. But linking is by no means a plain sailing process, and even more so when it comes to the two largest ETSs in the world with notable differences and varied policy priorities. The current linking literature focuses on mapping barriers in general and has not yet focused on EU and China, let alone the intricacies of policy designs. Given the gap in the literature and political interest expressed, this dissertation seeks to enrich the scientific and policy discussions by identifying obstacles to an EU-China linkage. Specifically, applying a Comparative Law & Economics Approach, the study set out to examine the current carbon regulatory framework in both jurisdictions. It further identified key concerns for a future link, including the heterogeneity of system designs (e.g. cap setting) and differences in the carbon regulatory features (e.g. ETS enforcement). In response, this dissertation proposes solutions for facilitating the link and discusses how the findings can assist the decision-making on crucial questions that ought to be posed in the first place: whether, when and how to link.