Successful cap and trade programs for SO2 and NOx in the US allocate allowances to large emitters based on a historic base line for a period of up to thirty years. National Allocation Plans in Europe allocate CO2 allowances in an iterative approach first for a three then for a five-year period....

Green technological progress bears a strong potential to alleviate climate change, but its utilization is contingent on factors which are by nature impossible to anticipate or predict. Developing stochastic optimisation models, we explore how the decision to invest in research and development...