By John Palmisano
Eco-Energo Trade

Brent Haddad and John Palmisano argue (in "Market Darwinism vs. Market Creationism: adaptability and fairness in the design of green-house gas trading mechanisms") that adaptability is an important attribute of both emission credit and cap-and-trade systems. Adaptability may be a valuable attribute when market-governance institutions are evolving rapidly or when regulated entities do not yet have well-established and predictable compliance routines. It is also an important factor if stakeholders are inexperienced and reluctant to make irreversible regulatory decisions. It is further argued that emissions trading programs evolve in somewhat predictable ways, from the simple to the institutionally complex.

There has been substantial experience in the United States with both credit and quota trading systems, but there is little experience outside of the US with these systems despite millions of dollars invested in many countries. If the "market Darwinism" hypothesis is true, one would expect a lot of experimentation outside of the US because regulatory systems are still evolving, public consensus is still unclear, and constituencies for economic efficiency are notoriously weak. Within the US, there are still lingering camps of resistance to trading-based programs. 

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