The political roots of divergence in carbon market design: implications for linking

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Table 1. General ETS design features and descriptions.

Design feature	Description
Type of system	Cap-and-trade or baseline-and-credit system; the length of trading periods; the existence of specific mechanisms to allow additional flexibility within or between trading periods; governance level (e.g. sub-national, national, or supra-national system)
Level of ambition	Type of cap and level of targets to achieve emissions reductions
Coverage	Inclusion of sectors and gases in the system
Allocation	Free allocation or auctioning; allocation rules (including for new entrants and closure and for emissions-intensive and trade-exposed industries)
Offset and linking rules	Types of domestic offsets or credits based on the Clean Development Mechanism (CDM)
Monitoring, verification and enforcement	Rules and institutions for monitoring and verification and reacting to cases of non-compliance
Price-management mechanisms	Rules and possible institutions established to stabilize the carbon price, such as banking and borrowing, price floors/ceilings or quantity-focused measures
Revenue earmarking	Any rules for earmarking auctioning revenues for specific activities or sectors in systems where auctioning is a significant means of distributing allowances