Economic models for assessing the economic effects of linking emissions trading schemes

Before linking emissions trading systems, there should be a good understanding of the expected economic implications: How could linking affect the development of the common allowance price, the development of emissions or industrial production, capi-tal flows or liquidity? Answering these questions requires a multitude of data and as-sumptions and therefore usually the use of economic models. 

This report gives an overview of various economic models that are suitable for as-sessing the economic effects of linking. It analyses the economic indicators relevant for the assessment of the effects of linking, formulates requirements for economic mo-dels to answer this question, discusses the advantages and disadvantages of different modelling approaches and gives an assessment of which models are suitable in prin-ciple for the assessment of linking. Five models were selected for a more detailed de-scription: E3ME, GEM-E3, PACE, POLES, and TIMES-MARKAL.