Tradable Permits for Greenhouse Gas Emissions: A primer with perticular reference to Europe

This paper is written as part of a two-year study of climate change policy choices facing Sweden, conducted under the auspices of the Center for Business and Policy Studies in Stockholm. As such, it aims to be a primer on emissions trading as an instrument for limiting greenhouse gas (GHG) emissions under the Kyoto Protocol to the Framework Convention on Climate Change. The first section notes general considerations concerning emissions trading, particularly in relation to climate policy. The second section explains the many forms of emissions trading included in the Kyoto Protocol. The third section provides a brief review of emissions trading proposals that have been advanced in Europe as of mid-2000. The fourth section addresses issues in the design and implementation of a national GHG emissions trading system. The brief conclusion is followed by an appendix, which draws applicable lessons concerning the choice and design of a cap and trade system from the U.S. SO2 emissions trading program.