page_title: Emissions trading
section_title: Criticism
hierarchical_section_title: Emissions trading / Criticism
caption_attribution_description: English: Chicago Climate Justice activists protesting cap and trade legislation at the intersection of LaSalle &amp; Adams in Chicago Loop Русский: Активисты движения Chicago Climate Justice протестуют против принятия закона о торговле эмиссионными квотами на пересечении улиц LaSalle &amp; Adams в Чикаго
context_page_description: Emissions trading is a market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants.
  A central authority allocates or sells a limited number of permits that allow a discharge of a specific quantity of a specific pollutant over a set time period. Polluters are required to hold permits in amount equal to their emissions. Polluters that want to increase their emissions must buy permits from others willing to sell them. Financial derivatives of permits can also be traded on secondary markets.
  Cap and trade programs are a type of flexible environmental regulation that allows organizations and markets to decide how best to meet policy targets. This is in contrast to command-and-control environmental regulations.
  A 2020 study found that the European Union Emissions Trading System successfully reduced CO₂ emissions even though the prices for carbon were set at low prices.
context_section_description: Emissions trading has been criticised for a variety of reasons.
  For example, in the popular science magazine New Scientist, Lohmann (2006) argued that trading pollution allowances should be avoided as a climate stabilization policy for several reasons. First, climate change requires more radical changes than previous pollution trading schemes such as the US SO₂ market. It requires reorganizing society and technology to "leave most remaining fossil fuels safely underground". Carbon trading schemes have tended to reward the heaviest polluters with 'windfall profits' when they are granted enough carbon credits to match historic production. Expensive long-term structural changes will not be made if there are cheaper sources of carbon credits which are often available from less developed countries, where they may be generated by local polluters at the expense of local communities.
  Research by Preston Teeter and Jorgen Sandberg has shown that the flexibility, and thus complexity, inherent in cap and trade schemes has resulted in a great deal of policy uncertainty surrounding these schemes. Such uncertainty has beset such schemes in Australia, Canada, China, the EU, India, Japan, New Zealand, and the US. As a result of this uncertainty, organizations have little incentive to innovate and comply, resulting in an ongoing battle of stakeholder contestation for the past two decades.
  Lohmann (2006b) supported conventional regulation, green taxes, and energy policies that are "justice-based" and "community-driven." According to Carbon Trade Watch (2009), carbon trading has had a "disastrous track record." The effectiveness of the EU ETS was criticized, and it was argued that the CDM had routinely favoured "environmentally ineffective and socially unjust projects."
  Annie Leonard's 2009 documentary The Story of Cap and Trade criticized carbon emissions trading for the free permits to major polluters giving them unjust advantages, cheating in connection with carbon offsets, and as a distraction from the search for other solutions.
caption: Chicago Climate Justice activists protesting cap and trade legislation in front of Chicago Climate Exchange building in Chicago Loop
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