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Carbon trading: how it works and why it fails

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Abstract:

Carbon trading is the flagship policy for tackling climate change within Europe, and it is failing badly. While in theory it provides a cheap and efficient means to limit greenhouse gas reductions within an ever-tightening cap, in practice it has rewarded major polluters with huge windfall profits, whilst undermining efforts to reduce pollution and achieve a more equitable and sustainable economy. This article briefly examines the theory of carbon trading, then looks at the empirical record of both the EU Emissions Trading System (EU ETS) and the UN Clean Development Mechanism, which are the world's largest carbon trading schemes. In conclusion, it briefly surveys the plethora of ways to tackle climate change in a more just and equitable manner.

Keywords: ALTERNATIVES; CARBON TRADING; CLIMATE CHANGE; EU EMISSIONS TRADING SYSTEM; GREENHOUSE GASES; UN CLEAN DEVELOPMENT MECHANISM

Document Type: Research Article

DOI: http://dx.doi.org/10.3898/136266210792307050

Publication date: August 11, 2010

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