Tradable quotas: using information technology to cap national carbon emissions

This paper proposes an economic instrument for shifting national economies away from their dependence on fossil fuels. Tradable quotas would specify the permissible quantity of carbon emissions from all sources within a national economy, allowing the price to adjust around it, and using information technology to distribute the quota units through the market. The paper outlines the task of carbon reduction now facing developed economies, explains how tradable quotas could be used to fulfil it, and sets out the advantages of tradable quotas in relation to the more widely advocated instrument of carbon taxes.