Legal Possibilities for an EU-California ETS Linkage

The European Commission and California's government have expressed their mutual will to deepen their collaboration on emissions trading and align their carbon markets. This article provides an updated review of the legal barriers and options for linking the European Union Emissions Trading System with California's Cap-and-Trade Program. Such a transatlantic linkage could bring certain economic and political benefits to both jurisdictions. In light of constitutional constraints on California's treaty-making capacity, the linkage can be legally materialized on the basis of an informal agreement, through reciprocal amendments to the respective emissions trading regulations. A legal barrier could potentially emerge from the different approaches of EU and California on cost-containment measures, but could nevertheless be surpassed with the gradual implementation of certain mutual carbon market reforms. Finally, the existing linking agreements between the EU and Switzerland and between California and Québec require the consent of the respective linking partners before a new linkage can be established