Trading it in for a Better Model: are tradable emission permits the way to go?

While the Kyoto Protocol on the abatement of international greenhouse gas emissions has been thrown into doubt by the recent US decision not to ratify, the European Union seems intent on proceeding with the emission limits agreed to by its Member States. In the case of Ireland, the agreement allows for a 13 per cent increase over the 1990 levels during the period 2008-2012. However, given the rapid economic growth over the last decade these limits have already been exceeded. As a consequence hard abatement choices are needed if this agreement is to be adhered to. This paper examines the issues that surround the implementation of this agreement for Ireland. Leaving the geopolitics aside, the paper considers the magnitude of the problem facing Ireland reaching the target and the likely policy instruments available in achieving it in an efficient manner. The distributional impacts of the policies under consideration are outlined. The main conclusion of this paper is that the potential benefits from an emissions trading programme at the national level, mirroring developments being pursued internationally, would seem to have much to recommend it in the current context for Ireland.