Document Type


Publication Date

January 2009





First Page



INTRODUCTION The United States, after ignoring climate policy for the last decade, now finds itself debating the merits of a national cap-and-trade policy. Currently, U.S. environmentalists are divided over whether to support the watered-down American Climate and Energy Security bill (ACES), also known as the Waxman-Markey bill. ACES passed the U.S. House of Representatives only after significant changes were made to address concerns from the coal industry and other powerful forces; and the bill likely faces even more compromises if it is to be passed in the U.S. Senate.' Supporters of the Waxman-Markey bill believe it is best to establish the carbon market immediately, even if the emission caps are too high, the supply of available offsets is too high, and the ultimate price of greenhouse gas (GHG) emission allowances is too low. The key question now is whether a flawed market is better than no market, whether a soft price for carbon can still establish long-term incentives to reduce carbon, and whether the market can be fine tuned in later periods. As the United States wrestles with the development of a national cap-and-trade system for GHGs, it is natural and appropriate to revisit the experience of the European Union (EU). The EU has been aggressively addressing climate change for nearly a decade, including through the use of an extensive and ambitious cap-and-trade system. Although many observers have criticized EU efforts to address global warming, this article argues instead that the EU has been largely successful in demonstrating the feasibility of an international carbon market and in continuing the momentum of multilateral cooperation to address global warming.