Governments willing to commit themselves to maintain carbon prices at or above a certain level face the challenge that their commitments need to be credible both for investors in low-carbon technology and for foreign governments. This article argues that governments can make such commitments by...

The European emissions trading scheme (EU ETS) has an efficient and effective market design that risks being undermined by three interrelated problems: the approach to allocation; the absence of a credible commitment to post-2012 continuation; and concerns about its impact on the international...

To meet its Kyoto requirements, the EU will establish an internal market for carbon dioxide allowances from 2005, the EU Emissions Trading Scheme (ETS). National governments are to allocate most of these allowances for free. The analysis shows that as a result of the free allocation, the net...

The allowance allocation under the European emission trading schemes differs fundamentally from earlier cap-and-trade programmes, such as SO₂ and NO_x in the USA. Because of the sequential nature of negotiations of the overall budget, the allocation also has to follow a sequential process. If...