Emissions trading: what makes it work?

Purpose – The purpose of this paper is to critically discuss the main advantages of introducing environmental regulation tools such as tradable permits markets. Design/methodology/approach – Current climate policies, the negotiations under way at the international level, and past experiences with emissions trading in the USA and Europe are critically reviewed. Findings – The creation of emissions trading schemes such as the European Union emissions trading scheme plays a key role in the preservation of the global public good that constitutes the climate. Research limitations/implications – This paper calls for the wider development of emissions trading schemes in climate change policy, given a careful design and regulatory appraisal from past experiences. Originality/value – This paper reveals that the introduction of a tradable permits market (such as in Europe on 1 January 2005) which provides incentives to take early abatement measures, may be seen as a decisive first step to fight climate change. [ABSTRACT FROM AUTHOR]