We propose enforcement strategies for emissions trading programs with bankable emissions permits that guarantee complete compliance with minimal enforcement costs. Our strategies emphasize imperfect monitoring supported by a high unit penalty for reporting violations, and tying this penalty...

Starting in 2005, the EU will implement a CO<Subscript>2</Subscript> emissions trading scheme. We show that the outspoken objectives of economic efficiency and free allocation of allowances are incompatible with harmonized allocation rules. The latter would be necessary to avoid unequal changes of the financial...</subscript>