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Environmental Commodities: Markets and Emissions and Emissions Trading: Toward a Low-Carbon Future, by Blas Luis Pérez Henríquez Cambridge, MA: MIT Press, 2013. 280 pp., $37.00, paperback.
I never fully understood why the European Commission felt obliged to embrace "learning by doing" with respect to emissions trading. The United States already had a substantial history of success and failure with emissions trading by the time that the EU began crafting its emissions trading scheme (ETS). Tomymind, this experience taught some rather clear lessons, which policymakers, for some reason, have not learned: Include only pollutants that can be wellmonitored and impose mass-based caps on all polluters allowed to participate in the system. But learning fromthe world's experience with emissions trading may require studies of actual experience and a willingness to resist economic theory's call, strongly supported by special interests, to ignore experience's lessons in the pursuit ofmaximizing hypothetical efficiency.
Environmental Commodities seeks to teach us some lessons about trading by examining the United States experience with emissions trading under the Clean Air Act and international experience primarily under the Kyoto Protocol. Although this book mentions other programs, it contains chapters onearly US offset programs (often called bubble programs), the US acid rain program, California's Reclaim program, recent nitrogen oxide trading programs in the eastern half of the United States, and finally international experiencewith greenhouse gas emissions trading. This last chapter primarily addresses the EU ETS, but also includes sections on the Regional Greenhouse Gas Initiative (a program focused on utility carbon dioxide emissions in the US northeastern region) and California's AB 32, a broader greenhouse gas initiative just getting offthe ground.
The book focuses on three research tasks, identifying essential design features for trading markets, evaluating how transferrable knowledge about trading might be across different contexts, and calibrating the extent of political interference with making trading efficient. The book's main conclusions focus on this first question and have...