Organizing emissions trading: the barrier of domestic permit allocation

This paper uses a barrier model of politics to analyse the issue of permit allocation as a major political obstacle to organizing (inter)national greenhouse gas emissions trading. It is argued that permit allocation constitutes a barrier, because — among other things — various types of emitters have conflicting interests in trying to lobby for as much allocated permits as possible and because international differences in domestic permit allocation procedures are perceived to potentially distort inter-firm competitiveness relations. Permit allocation is circumvented by applying intergovernmental or project-based emissions trading. The project-approach is preferable, in particular because it avoids the trading of `hot airʹ.