The objective of this paper is to find out whether differences between the domestic permit allocation procedures of the Member States of the European Union (EU) will distort competition and lead to state aid in a European carbon trading market. This paper shows that it depends whether one takes...

The European Commission (2001a) has recently presented a directive proposal to the Parliament and the Council in order to implement a tradable permits scheme. However, as stressed by the positive political economy, due to the influence of various interest groups, very few environmental policies...