In support of the partnership for marketreadiness work on helping the emergence of credible,consistent, and compatible market-based infrastructureacross countries, this report reviews the lessons learnedfrom linking greenhouse gas emissions trading systems. Twoemissions trading systems (ETS) are linked if a participantin one system can use a compliance instrument (allowance orcredit) issued by the administrator of either system forcompliance. This report focuses on links that enableparticipants of both ETS to use compliance instruments fromeither system (bilateral links). The linked systems canadopt common compliance instruments. Or each system canretain its own compliance instruments and accept those fromeither ETS for compliance, possibly subject to restrictions.A bilateral link offers three potential benefits. First, itcan make an ETS a viable policy option for a jurisdictionwhere an independent ETS will be infeasible for technical orcost reasons. Second, a bilateral link can reduce the totalcost of achieving the combined emissions caps of the linkedETS. Third, a bilateral link can enhance the operation ofthe market for the compliance instrument(s). Section onegives background information. Section two presents the typesof links an ETS can establish and discusses the potentialbenefits and risks of linking. The requirements for abilateral link between two ETS are summarized in sectionthree. How to implement a bilateral link is discussed insection four.
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