Both Labor and Liberals have committed to a national emissions trading scheme, and the Greens also support a trading scheme as an effective tool to tackle climate change. Market-based solutions are central to the Kyoto Protocol. But is carbon trading a real solution?

Carbon trading creates a market in which companies buy and sell pollution credits. The most widely used scheme is the “cap and trade” system: a cap on total emissions is established by government, permits to pollute are distributed among industry up to that cap and the “invisible hand” of the market supposedly finds the cheapest way to meet it. Read more