Emissions Trading as a Policy Instrument - Evaluation and Prospects - Grand Format

Emissions trading schemes figure prominently among policy instruments used to tackle the problem of climate change, and the European Union Emissions Trading Scheme (EU ETS), begun in 2005, is the largest cap-and-trade market so far established. Firms regulated by the EU ETS are provided with emissions allowances (each a onetime right to emit one ton of greenhouse gases) and may sell their unused allowances to firms that have higher rates of emissions.
In this volume, leading economists offer empirical and theoretical perspectives on the early phases of implementation of the EU ETS. The contributors discuss the features of the EU ETS market ; regulatory uncertainty stemming from rule changes ; the political economy context of the trading scheme, including allowance allocation and the influence of lobbying on abatement decisions ; the coexistence of such overlapping instruments for climate policy as pricing and taxation ; the relationship between spot and futures markets for allowances ; and firms' responses to various features of the EU ETS, including fluctuating allowance prices, free allocation, and links to the Kyoto process.
They show that, although the basic theory behind emissions permit markets is straightforward, design features, market structure, and interactions with other policy instruments can influence the efficiency of the scheme.