ABSTRACT
Following the adoption of the Kyoto Protocol in December 1997, in which the European Union agreed to reduce its greenhouse gas emissions by 8 percent over the period 2008–12 compared to 1990 levels, a public policy debate started in Europe about the use of an emissions trading system as a central instrument to contribute to the emission cuts required. The trigger of this debate was the inclusion in the Kyoto Protocol of three articles that were providing the legal basis for a set of market-based mechanisms commonly referred to as flexible mechanisms. At the time of negotiating the Protocol the inclusion of these provisions gave rise to substantial controversy, as these flexible mechanisms were being pushed by US negotiators, while European negotiators were very hesitant to take them on board.
