The document discusses carbon emissions trading as an EU environmental policy to control climate change. It provides background on the EU Emissions Trading Scheme (ETS), which uses a cap-and-trade model to incentivize reductions in greenhouse gas emissions. The ETS allocates emissions allowances that can be traded, with the goal of decarbonizing the economy over the long term. However, the system has faced criticisms over weaknesses like over-allocation of quotas and lack of certainty about future rules.

1. Carbon Emissions Trading EU Environmental Policy

4. Pressure to reduce C02 emissions The USA has the highest per capita emissions of carbon but China and India and other Asian countries have huge populations – putting increased pressure on carbon emissions

10. Negative Externalities and Market Failure Price Quantity Private Optimal Output Marginal private cost (supply) Marginal private benefit (demand) Marginal social cost (supply) Social Optimal Output Efficiency Loss

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