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Many commentators have celebrated the link between carbonmarkets in California and Québec as an example of effective coordination of sub-national climate policy instruments. Here, Iargue that this enthusiasm is misplaced. California recentlyamended its carbon market regulations to enable significantleakage of emissions to neighboring states. These reforms reducethe environmental effectiveness of the market, contradict clearstatutory guidelines, and dilute the integrity of the state's compliance instruments. Moreover, the reforms took place in an administrative process that never recognized the leakage implications, raising questions as to whether California alerted itsCanadian counterparts of the consequences of its internal reforms.I review this transition from three perspectives: the relevantadministrative proceedings in California, the mutual obligationsboth governments accepted under a bilateral agreement,and the standards California law imposes on prospective linkedmarkets. Each perspective reveals major shortcomings. Ratherthan demonstrating a successful model for harmonizing carbonmarket systems across different legal jurisdictions, the link between California and Québec exemplifies a major institutionalweakness: in a linked carbon market, participating governmentsmust continuously monitor the administrative processes of eachjurisdiction in order to maintain market integrity. But as theCalifornia experience demonstrates, administrative law may notbe up to the task of ensuring that practical market operation follows the rule of law.

Many commentators have celebrated the link between carbonmarkets in California and Québec as an example of effective coordination of sub-national climate policy instruments. Here, Iargue that this enthusiasm is misplaced. California recentlyamended its carbon market regulations to enable significantleakage of emissions to neighboring states. These reforms reducethe environmental effectiveness of the market, contradict clearstatutory guidelines, and dilute the integrity of the state's compliance instruments. Moreover, the reforms took place in an administrative process that never recognized the leakage implications, raising questions as to whether California alerted itsCanadian counterparts of the consequences of its internal reforms.I review this transition from three perspectives: the relevantadministrative proceedings in California, the mutual obligationsboth governments accepted under a bilateral agreement,and the standards California law imposes on prospective linkedmarkets. Each perspective reveals major shortcomings. Ratherthan demonstrating a successful model for harmonizing carbonmarket systems across different legal jurisdictions, the link between California and Québec exemplifies a major institutionalweakness: in a linked carbon market, participating governmentsmust continuously monitor the administrative processes of eachjurisdiction in order to maintain market integrity. But as theCalifornia experience demonstrates, administrative law may notbe up to the task of ensuring that practical market operation follows the rule of law.

Cover -- Title page -- Copyright page -- Contents -- Figures and tables -- Figures -- Tables -- Preface -- 1 A turn toward markets? -- The inconvenient problems of politics -- A theory of politics -- The evidence -- A roadmap -- 2 Ambition -- Why politicians prefer regulation -- Why real-world institutions constrain policy choices -- The logic of Potemkin markets -- Conclusion -- 3 Coverage and allocation -- Which sectors get covered -- Why sectors are treated differently -- Conclusion -- 4 Revenue and spending -- Why politics favor green spending -- Why green spending becomes green pork -- Conclusion -- 5 Offsets -- Why quality lacks a constituency -- Why knife-edge incentives encourage low quality -- Why political forces favor local offsets -- Why offsets entrench rather than expand markets -- Conclusion -- 6 Market links -- Why links are rare, thin, and between similar systems -- Why political actors overpromise the value of market links -- Conclusion -- 7 Getting the most out of markets -- How to increase program ambition -- How to make spending more effective -- How to make external relations work -- 8 Rightsizing markets and industrial policy -- Toward a new industrial policy -- Decarbonization as an international strategy -- Rethinking leadership -- Conclusion -- 9 Conclusion -- Doing better -- The road ahead -- Notes -- Chapter 1 A turn toward markets? -- Chapter 2 Ambition -- Chapter 3 Coverage and allocation -- Chapter 4 Revenue and spending -- Chapter 5 Offsets -- Chapter 6 Market links -- Chapter 7 Getting the most out of markets -- Chapter 8 Rightsizing markets and industrial policy -- Index -- EULA.