Introduction

Emissions trading under the Marrakech Accords and the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) allow countries to trade emissions of greenhouse gases with each other. Although this scheme is presently limited to the developed countries, it is anticipated that as and when developing countries commit themselves to some kind of upper emission limit, they too can participate in this process. There is also considerable pressure on developing countries to take on some form of measurable commitment as of the second budget period, which is expected to begin in 2012. For economists this is logical and necessary, since emissions trading is an efficient solution to the problem of climate change. Various formulae have been devised to facilitate allocations of initial emission entitlements or allowances that work in the interest of either the developed or the developing countries. The anticipated difficulties in reaching an amicable compromise were, however, seen as the reason that such a scheme would not work; nevertheless, through a clever negotiating strategy, emissions trading is one of the instruments in the climate change regime. But as someone who has grown up in a developing country, frequently visited developing countries, immersed herself in problems of developing countries, it is difficult for me to fathom that the international community does not realise that this instrument is doomed to failure since the majority of the countries of the world, including several of the East and Central European countries, just do not have the institutional wherewithal to cope with such a complex system with such high financial stakes.