Should the rules of allocating emissions permits be harmonised?

The Kyoto Protocol is the first international environmental agreement that sets legally binding greenhouse gas emissions targets and timetables for Annex I countries. Its Article 17 authorizes emissions trading among Annex B countries. If properly designed, emissions trading can effectively reduce their abatement costs, while assisting Annex I countries in achieving their Kyoto obligations. If Annex B governments elect to allocate the assigned amounts to their individual sub-national legal entities and authorize them to trade on the international emissions permits market, I argue that individual governments should be left free to devise their own ways of allocating emissions permits. © 1999 Elsevier Science B.V. All rights reserved.