ABSTRACT
As the negotiations at Kyoto drew to a close, it became clear that a new form of environmental regime was being created: the European Union and its allies had given up their attempt at a list of common and coordinated policies and measures applied to industrialized countries. After intensive communication and the support of many industrial players, economists and a fraction of nongovernmental organizations, the United States had convinced other Parties to agree on a set of legally binding objectives and the possibility of trading greenhouse gases (GHG) via a market mechanism, emissions trading. On paper, emissions trading would make the international regime cost-effective: at the margin, no Party would spend more to reduce than another Party. Last but not least, a carbon price would emerge and the market would then reveal one of the most crucial pieces of information for future negotiations: what it really costs to bring GHG emissions down. The Kyoto Protocol would become the perfect illustration of standard environmental economics. Or so the proponents of the tool – including these authors – would argue.
