Emissions trading could significantly reduce the costs of limits on greenhouse gas emissions. Complementary domestic policies to reduce fragmentation in evolving secondary markets, establish clear baselines and procedures, and strengthen host-country institutions could further reduce the risks...

Taxing imports from regions which are not subject to climate policy and subsidi-zing exports into these regions have recently been proposed to address presu-med negative effects of the EU Emissions Trading Scheme (EU ETS) on in-dustry competitiveness and carbon leakage. This paper analyzes the...