Major Papers


markets, trading, climate


This paper serves as a review of emission trading systems as a means to achieve reductions in the level of greenhouse gas emissions and other pollutants around the world. The review begins with the history of emission trading, beginning with early theoretical frameworks developed by economists in the 1960s and 1970s, followed by early implementations of permit markets similar to modern day emission trading systems. International negotiations related to emission reductions such as the Kyoto Protocol and Paris Agreement are discussed. Next, the economic mechanisms of emission trading systems are discussed, including a brief comparison to carbon taxes as an alternative market based implement to enact emission reductions. Finally, primary failures of emission trading systems are presented, showcasing some of the downfalls of such systems. The conclusion of this paper is that while emission trading systems provide a means to achieve a specified level of emission reductions at minimal cost, their dependence on the target level of reductions defines their effectiveness at reducing emissions. While not guaranteed to effectively reduce emissions, emission trading systems remain a powerful administrative tool to reduce the burden of cost when faced with meeting emission targets.

Primary Advisor

Yuntong Wang

Program Reader

Sang-Chul Suh

Degree Name

Master of Arts



Document Type

Major Research Paper

Convocation Year