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Abstract: Local authorities are important actors to mitigate climate change. They can implement policies which can reduce emissions of greenhouse gases in sectors like transport, waste, agriculture and land use, land use change and forestry (LULUCF). They can also implement policies which can increase carbon dioxide removals. The European Union Emissions Trading Scheme (EU ETS) is one of the most important initiatives to reduce carbon dioxide emissions in the EU. It is a cap and trade scheme encompassing almost half of the European-wide carbon dioxide emissions. However, carbon dioxide removals and sectors associated with local authorities’ responsibilities are not included in the EU ETS. The main objective of this paper is to propose an original cap and trade system, called LETS, designed to involve local authorities. The LETS was then tested and applied to all the local authorities in the mainland of Portugal covering emissions and removals of a single greenhouse gas (carbon dioxide) in the LULUCF and the transport sectors. The system proved to have the necessary conditions to be implemented and adaptable to other country contexts. [Copyright &y& Elsevier]