Chapter 70 Trading Institutions and Emission Allowances In the frictionless world of theory without transaction costs allowance trading offers the potential of billions of dollars in savings when compared to traditional command and control regulation. It is therefore not surprising that regulators have embraced this approach in recent years to reduce the pain of achieving specific environmental objectives. This short review highlights the fact that policy makers must recognize that the devil is in the details and that several intermediate steps are necessary when translating these plans and schemes from the theorists blackboard to the field. For example regulators need to carefully consider the design of any new trading institutions and allowance characteristics. Failure to consider these details can lead to poorly designed trading institutions such as the EPA auction which can slow the development of the market and require redesign after only several years of operation. By contrast sufficient consideration of incentives and sponsoring laboratory experiments when appropriate can lead to a better design of allowance characteristics such as in the RECLAIM program.