Linking carbon markets ‘not a priority’

International links between emissions trading systems (ETS) are useful but not an immediate priority, delegates at an online event this week heard.

"Linking is not an immediate concern," Vicky Pollard of the European Commission's Directorate-General for Climate Action told delegates at the European University Institute's State of the Union conference.

Thinking about international links between carbon markets is useful, but there is a "long way to go", she said.

Such markets are designed to meet domestic targets, Pollard said, which creates issues when looking to link because aspects such as the sectors covered by the systems vary. Linkages also raise questions concerning sovereignty.

"Liquidity is nice but it is a second-order issue," Suzi Kerr of US-based advocacy group Environmental Defense Fund told delegates. Countries should look at harmonising elements of their ETSs, but a so-called climate club with direct links between markets is "not a priority", she said.

Kerr also expressed concerns about the "idea of exclusivity" evoked by the concept of a climate club. "What would be more useful is a coalition," she said, which would allow trust and transparency while still providing a positive example.

But linking markets is a way of creating a level playing field for countries with the same ambition, Duan Maosheng of China's Tsinghua University said, suggesting it is something that could be attempted in the near future. China aims to launch its ETS by June.

The possibility to link domestic ETSs is part of article 6.2 of the Paris climate agreement, finalising the rulebook for which will be a key element of November's UN climate summit, Cop 26.

Kerr said at this week's conference that she hoped Cop 26 would move away from just high-level political discussion towards implementation.

It would be a shame if the focus of the summit was heavily on the EU's proposal for a carbon border adjustment mechanism, she said, emphasising that the policy can be seen by some as penalising and could therefore lead to conflict.

The commission is in the process of developing proposals for the mechanism as part of a raft of measures to bring EU climate policy in line with its increased emissions reduction target of 55pc by 2030 compared with 1990 levels, the presentation of which has been delayed until mid-July.

Commission vice-president Frans Timmermans said earlier this year that proposals for a carbon border could be more effective than actually implementing the mechanism, as they could act as a preventive measure to encourage increased climate action among major trade partners.

By Victoria Hatherick