Identifying the Proper Incidence of Regulation in a European Union Greenhouse Gas Emissions Allowance Trading System


This paper compares upstream, downstream and hybrid approaches to designing a greenhouse gas cap-and-trade system for the European Union. These trading models are assessed with reference to five policy criteria: economic efficiency, environmental effectiveness, distributional implications, administrative feasibility and cultural acceptability. This paper focuses on the first three criteria while noting considerations relevant to the latter two.

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