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Environmental Economics

Using Emissions Trading to Combat Climate Change: Programs and Key Issues

31 May 2008
By Dr. David Harrison and Daniel Radov et al.

Emissions trading has emerged as the major policy instrument to address climate change, as evidenced by programs and proposals in Australia, Europe, the US, and elsewhere. A host of choices need to be made to design and implement a greenhouse gas emissions trading program, choices that are important both to the performance of the program and to the many private firms and groups that are affected.

This article from the Environmental Law Reporter investigates these alternatives. The authors explain that private firms and sectors need to understand how their costs and revenues might be affected and determine how to take advantage of the flexibility provided by emissions trading. The development of a carbon market, as well as the other market effects of a climate change program, also will have an impact on such key decisions as the development of new capacity or the retirement of existing plants and equipment. Understanding these influences will help firms and sectors to respond effectively and, in the process, allow the trading programs to achieve goals of meeting key climate change objectives at the lowest cost to society.