The objective of this paper is to find out whether differences between the domestic permit allocation procedures of the Member States of the European Union (EU) will distort competition and lead to state aid in a European carbon trading market. This paper shows that it depends whether one takes...

"Standard" environmental economics considers emissions trading to be the most effective and efficient policy instrument to meet the emission target. However, a popular view is that tradeable permits should be part of a policy portfolio, including other instruments, to reach this goal. Support...