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Market-based solutions to environmental problems offer great promise, but require complex public policies that take into account the many institutional factors necessary for the market to work and that guard against the social forces that can derail good public policies. Using insights about markets from the new institutional economics, this book sheds light on the institutional history of the emissions trading concept as it has evolved across different contexts. It makes accessible the policy design and practical implementation aspects of a key tool for fighting climate change: emissions t.

A growing number of GHG emissions trading schemes are being implemented at regional or national levels. However, even as the number of different schemes grows, few linkages exist between them. Major cap-and-trade proposals are currently at important stages in their development, especially in the United States, Japan and Australia, some of which explicitly emphasize the aim of linking with other schemes. One of the strategic goals of European climate policy is linking the EU ETS with other comparable schemes. The research presented in this volume is on actual economic, political and institution.

Emissions trading mechanisms have been proposed, and in some cases implemented, as a tool to reduce pollution. We explore the similarities between emission-trading mechanisms and monetary mechanisms. Both attempt to implement desirable allocations under various frictions, including risk and private information. In addition, implementation relies on the issue and trading of objects whose value is at least partially determined by expectations, namely money and permits, respectively. We use insights from dynamic mechanism design in monetary economics to derive properties of dynamic emissions trading mechanisms. At the optimum, the price of permits must increase over time. Efficient tax policies are state-contingent, and there is an equivalence between state-contingent taxes and emissions trading. Restrictions resulting from the money-like feature of permits can break this equivalence when there is endogenous progress in clean technologies. These restrictions must be taken into consideration in actual policy implementation.

In response to the Kyoto Protocol the European Union implemented the European Emission Trading Scheme (EU-ETS). Starting in 2005 the scheme had initially been limited to certain stationary installations. Since 2012 it has been extended to encompass emissions from aviation activities as well. Hence for emissions resulting from the combustion of fossil fuels emission allowances have to be surrendered. These allowances are either allocated free of charge or auctioned. For emissions resulting from the combustion of sustainable biofuels no emission allowances are required. Following the broad international opposition against the inclusion of aviation in the EU-ETS, flights beyond the European Economic Area have been excluded in anticipation of an international approach to mitigate the global aviation emissions. This paper first outlines the intention and development of the EU-ETS with a focus on the legislation concerning aviation. Moreover the administrative procedures to fulfil the regulatory obligations are described, especially the requirements to account for the use of biokerosene. Finally, the derogation from the original legislation and the Market-based Measures currently developed on the ICAO-level are considered in the outlook.

The 1997 Kyoto Protocol envisages a World with each national emissions trading scheme ("ETS") linked to achieve a global market for carbon. Under this vision a carbon price is factored into commercial decision making motivating a trend towards green energy whilst a global market ensures efficiencies - funds flowing to those jurisdictions where green energy is cheapest. Unfortunately this vision has been blunted by real World politics, greed and ignorance. A World populated by national ETSs has yet to materialize, nor a global market for carbon. However, some jurisdictions have enacted ETSs. In particular, the European Uniotn ("EU") has had an ETS for nine years, in 2010 the Tokyo Metropolitan Government ("TMG") established an ETS, New Zealand established a scheme in 2008 which it broadened significantly in 2010, California introduced a regime on 1 January 2013 and since 1 July 2012 Australia has had a comprehensive nationwide ETS. The emergence of these regimes raises the possibility of linking the respective carbon markets. The EU and Australia have already committed to full bilateral linkage from 1 July 2018. This paper explores the issues that arise with linking the Australian regime. It will be demonstrated that whilst there are some barriers to linkage, with appropriate "fixes" linkage between the Australian and other regimes might be achievable. The question is whether the political will to do so exists.

Emissions trading (ET) challenges business managers in an entirely new manner, changing the criteria by which environmental policy steers management decisions from hierarchical to monetary. The 24 contributions to this volume discuss ET theoretically and empirically in these broad topic areas: 1) Institutional design, decision making and innovation; 2) Investment and management strategies; 3) ET and business administration and 4) Effects of existing and emerging ET schemes.