Document Type

Master's Culminating Experience

Publication Date



The carbon trading system is one mechanism proposed to reduce carbon dioxide emissions and to solve global warming. The key issues in adopting a carbon trading system include trading schemes selection, emitting permits allocation, and auction revenue distribution. This thesis discusses these problems from a Neoinstitutionalist perspective, and conducts an analysis under the socio-ecosystem framework rather than the restricted market system analysis. It is found that the most important issue is to set an appropriate cap for the total allowed emission amount through recognizing the socio-ecosystem value. The absolute cap-and-trade system is supported since it can decrease the emissions to the targeted level where the ecosystem sustains. By including social cost in the analysis, it becomes clear that the auction method should be adopted to allocate emission permits. The thesis uses the property regimes theory and concludes that Barnes’s Sky Trust should be established to allocate auction revenues. In addition, Swaney’s co-management approach is recommended for managing the atmosphere.