This book focuses on the first period (2005–7) of the European Union Emissions Trading Scheme (EU ETS), known also as the ‘pilot’ or ‘trial’ period. The EU ETS is one of the most exciting and important initiatives ever taken to limit the greenhouse gas emissions that cause climate change. It will be an important influence on the development and implementation of trading schemes in the United States, Japan and elsewhere. As such, it can provide the cornerstone for an eventual global trading regime, which will be an important component of the set of policies that will be needed to address climate change.

The audience for this book are those in all walks of life who want to understand how the EU ETS came about, and (especially) how it functioned in its early life. It is written by economists, but for a general audience, defined as those who take more than a passing interest in how to address our planet's climate change challenge and who are neither technically nor temperamentally attuned to the economics literature. It will also be of value to those with an interest in understanding how the European Union can function effectively in developing and executing a climate policy that has global implications.

Ever since the profession of environmental economics came into being, the integration of the environment and the economy via markets has been a core objective, and the reason why many entered the field in the first place.