1064 NATURE CLIMATE CHANGE | VOL 4 | DECEMBER 2014 | www.nature.com/natureclimatechange T he top-down approach to mitigating climate change as exempliied by the UNFCCC negotiations and the Kyoto Protocol has all but stalled, due to a panoply of political objec- tions. To crat a more workable policy, states and non-state actors alike have shited their focus to bottom-up ‘linkage’ of multinational, national, and subnational cap-and-trade systems 1–8 . Although link- ages between markets could provide a framework for international cooperation on climate policy, they cannot guarantee the seamless development of a decentralized and self-enforcing governance mech- anism. We identify four obstacles to successful linkage, which turn out to be similar to those that have plagued the global climate nego- tiations. Domestically, they include the challenge of agreeing on and evaluating diferent levels of ambition as well as the potential incom- patibility with other domestic policy objectives. Across jurisdictions, obstacles may arise from political objections to inancial transfers, and the diiculty of close regulatory coordination. Given the importance of inding a path toward an efective archi- tecture for global climate policy, we suggest an incremental approach that combines elements of decentralized experimentation with stra- tegic negotiations, which could help to manage and overcome these obstacles. Careful, gradual linkage could serve as an important politi- cal instrument and learning process, but it will not provide a way around ‘global warming gridlock’ 3 . An efective global policy archi- tecture will still require close international coordination with a bal- ance of bottom-up and top-down elements. The rise of unilateral climate action One of the main purposes of an international agreement is to provide incentives for coordinated action by curbing free-riding 9–11 . It may therefore seem paradoxical that some nations averse to an interna- tional climate treaty have begun to adopt policies to address climate change unilaterally. hese include cap-and-trade systems, carbon taxes, commitments to reducing energy intensity, forest codes to combat deforestation, and a host of sectoral and regulatory policies aimed at improving energy eiciency, and developing and deploying renewable energy sources. We focus on cap-and-trade systems, which are becoming increasingly prevalent 12–15 . he European Union has a regional cap-and-trade system, New Zealand has a national system, A balance of bottom-up and top-down in linking climate policies Jessica F. Green 1 , Thomas Sterner 2,3 and Gernot Wagner 3,4,5 * Top-down climate negotiations embodied by the Kyoto Protocol have all but stalled, chiely because of disagreements over targets and objections to inancial transfers. To avoid those problems, many have shifted their focus to linkage of bottom-up climate policies such as regional carbon markets. This approach is appealing, but we identify four obstacles to successful linkage: diferent levels of ambition; competing domestic policy objectives; objections to inancial transfers; and the diiculty of close regulatory coordination. Even with a more decentralized approach, overcoming the ‘global warming gridlock’ of the intergovernmental negotiations will require close international coordination. We demonstrate how a balance of bottom-up and top-down elements can create a path toward an efective global climate architecture. and several jurisdictions in the United States and Canada participate in subnational systems. Cap-and-trade systems are also becoming popular in the developing world. Seven Chinese cities and provinces are piloting various models of cap and trade. All told, the World Bank estimates that around 7% of global emissions are under some form of carbon cap 16 . his emergence of a patchwork of national and subnational carbon markets has prompted calls for a bottom-up climate architecture: let countries or subnational governments set the pace through unilateral policies — and then link them. his has also been the recent de facto negotiating position of the US delegation to UN climate talks. Many academic observers have begun to consider the mechanics of imple- menting linkages 2,4–8,17 . Linkage plays a prominent role in such a bottom-up architecture. It can potentially produce economic beneits — more reductions at a cheaper cost — as well as political ones, by providing an alternative to global negotiations and a testing ground for bottom-up innovation. Indeed, some linkage arrangements are beginning to emerge or are already in place, such as between California and Quebec. here are also links between carbon markets and jurisdictions without a cap on emissions. hese are oten created by ‘lexibility mechanisms’  — so named, because they allow capped sources to procure low-cost emis- sions reductions from sources in uncapped jurisdictions. he Clean Development Mechanism is perhaps the most prominent example. The mechanics of linkage Linkage can take many forms, and can be applied to tax systems, renewable portfolio standards or other regulatory approaches 6 . he simplest version of linking cap-and-trade systems is a two-way direct linkage: Jurisdiction A agrees to accept Jurisdiction B’s allow- ances and vice versa. (As cap-and-trade systems are implemented at multiple levels of governance, we use ‘jurisdiction’ as a general term to refer to any political entity with a trading system.) he linkage between California and Quebec is an example of a two-way direct linkage. However, if B chooses not to accept A’s allowances, then the linkage is one-way. Moreover, if A is linked to B and B is linked to C, then jurisdictions A and C are indirectly linked. Systems may also become indirectly linked if two of them have one-way links to a third. 1 Department of Political Science, Case Western Reserve University, 10900 Euclid Avenue, Cleveland, Ohio 44106, USA. 2 University of Gothenburg, Vasagatan 1, 40530 Gothenburg, Sweden. 3 Environmental Defense Fund, 18 Tremont Street, Suite 850, Boston, Massachusetts 02108, USA. 4 Columbia University School of International and Public Afairs, 420 West 118th Street, New York, New York 10027, USA. 5 Harvard Kennedy School, 79 John F. Kennedy Street, Cambridge, Massachusetts 02138, USA.*e-mail: gwagner@edf.org PERSPECTIVE PUBLISHED ONLINE: 26 NOVEMBER 2014 | DOI: 10.1038/NCLIMATE2429 © 2014 Macmillan Publishers Limited. All rights reserved