Greenhouse Gas Emission Trading

The European Union’s Greenhouse Gas Emission Trading Scheme (EU ETS) came into force on January 1st. Under the scheme companies trade the right to emit greenhouse gases with each other. Many free marketers have spoken favourably about such schemes, probably because the solution is seen as market based. I am not so sure. The system seems to rely on heavy government regulation and arbitrary limits. I think a carbon tax, that actually penalised carbon dioxide production (not the climate change levy which includes Nuclear) would actually work with the market in a better way.