Political debates over climate policy in general and carbon trading in particular commonly focus on the impacts on industrial competitiveness and income distribution. Concerns over these issues can easily be overstated and the potential for win-win opportunities overlooked. Nevertheless unless these concerns are adequately addressed, the effectiveness of carbon trading will be undermined - most notably through the negotiation of relatively weak caps.
An issue that has received less attention is how a carbon trading scheme will affect other climate and energy policies. This section examines the impact of a carbon trading scheme on industrial competitiveness (subsection 11.3.1), income distribution (11.3.2) and other climate policies (11.3.3). It argues that the political feasibility and success of a trading scheme depends upon how each of these issues is addressed.
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