Editing Emissions trading (section)

===Coase model===

[[The Problem of Social Cost|Coase (1960)]]<ref>{{Cite web
 |year            = 2001
 |title           = 10.4.5 Who Should Pay for the Response? Mitigation by Countries and Sectors: Equity and Cost-effectiveness Considerations. In (book chapter): Decision-making Frameworks. In: Climate Change 2001: Mitigation. Contribution of Working Group III to the Third Assessment Report of the Intergovernmental Panel on Climate Change (B. Metz ''et al''. Eds.)
 |publisher       = Print version: Cambridge University Press, Cambridge, UK, and New York, N.Y., U.S.A.. This version: GRID-Arendal website
 |author          = Toth, F.L.
 |url             = http://www.grida.no/climate/ipcc_tar/wg3/445.htm
 |access-date      = 2010-01-10
 |display-authors = etal
 |archive-url     = https://web.archive.org/web/20090805205830/http://www.grida.no/climate/ipcc_tar///wg3/445.htm
 |archive-date    = 2009-08-05
 |url-status        = dead
}}</ref><ref>{{Cite journal
 |year=2005 
 |author=Helm, D. 
 |title=Economic Instruments and Environmental Policy 
 |journal=The Economic and Social Review 
 |volume=36 
 |issue=3 
 |url=http://www.dieterhelm.co.uk/node/631
 |page=4 
 |access-date=2010-04-26 
 |url-status=dead 
 |archive-url=https://web.archive.org/web/20110501072425/http://www.dieterhelm.co.uk/node/631 
 |archive-date=2011-05-01 
}}</ref> argued that social costs could be accounted for by negotiating property rights according to a particular objective. Coase's model assumes perfectly operating [[Market (economics)|market]]s and equal [[bargaining power]] among those arguing for property rights. 
In Coase's model, efficiency, i.e., achieving a given reduction in emissions at lowest cost, is promoted by the market system. This can also be looked at from the perspective of having the greatest flexibility to reduce emissions. Flexibility is desirable because the [[margin (economics)|marginal]] costs, that is to say, the incremental costs of reducing emissions, varies among countries. Emissions trading allows emission reductions to be first made in locations where the marginal costs of abatement are lowest (Bashmakov ''et al''., 2001).<ref>{{Cite web
 |year            = 2001
 |title           = 6.3.1 International Emissions Trading. In (book chapter): 6. Policies, Measures, and Instruments. In: Climate Change 2001: Mitigation. Contribution of Working Group III to the Third Assessment Report of the Intergovernmental Panel on Climate Change (B. Metz ''et al''. Eds.)
 |publisher       = Print version: Cambridge University Press, Cambridge, UK, and New York, N.Y., U.S.A.. This version: GRID-Arendal website
 |author          = Bashmakov, I.
 |url             = http://www.grida.no/climate/ipcc_tar/wg3/246.htm#631
 |access-date      = 2010-04-26
 |display-authors = etal
 |archive-url     = https://web.archive.org/web/20090805204450/http://www.grida.no/climate/ipcc_tar///wg3/246.htm#631
 |archive-date    = 2009-08-05
 |url-status        = dead
}}</ref> Over time, efficiency can also be promoted by allowing "banking" of permits (Goldemberg ''et al''., 1996, p.&nbsp;30). This allows polluters to reduce emissions at a time when it is most efficient to do so.