Every major user of fossil fuel would need to buy permits to emit CO2, and those permits would trade in a special marketplace.

Whatever the outcome as regards the third objective, the way the project has been set up optimizes the potential for disbursing the fund under good conditions, and thus its durability.

It is also increasing the duration of work permits .

Because these permits trade at a market price, companies have an incentive to reduce their emissions, thereby requiring them to buy fewer permits or enabling them to sell excess permits for a profit.

Worse still, cap and trade systems in practice do not rely solely on auctions to distribute the emissions permits.

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When the permit prices become large enough to have a significant effect on CO2 emissions, there will be political pressure to introduce tariffs on imports that offset the advantage of countries with low permit prices. Such offsetting tariffs would have to differ among products (being higher on more CO2 intensive products) and among countries (being higher for countries with low permit prices).

When the permit prices become large enough to have a significant effect on CO2 emissions, there will be political pressure to introduce tariffs on imports that offset the advantage of countries with low permit prices.

But, instead of raising revenue by auctioning the emission permits, Obama has agreed to distribute them without charge to favored industries in order to attract enough congressional votes.

Carbon dioxide emission, metric ton per capita.

And there, the concept is to immediately move to zero emissions.

Since 1990, methane emissions have decreased by 11 .

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Will Cap and Trade Incite Protectionism?

Resolution Switcher

But a carbon tax is far more transparent and potentially less prone to the pitfalls seen in international carbon quota trading.

Under California law, proceeds from allowance auctions must be used for programs that reduce emissions of greenhouse gases.

The market price of the permits would be equivalent to paying a tax on CO2 emissions.

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Carbon emissions have kept increasing, despite repeated promises of cuts.

Decades of talks have failed to make any impact on carbon emissions. Expecting China and India to make massive emission cuts for little benefit puts the Copenhagen meeting on a sure path to being another lost opportunity.

The problem with the Kyoto system is assigning caps that will be acceptable to developed and developing countries. Giving emission allowances is like giving away money potentially hundreds of billions of dollars.

Most are committed to reducing emissions by 8 by 2010.

Decades of talks have failed to make any impact on carbon emissions.