The trading of gas emissions greenhouse under the microscope of economic analysis of law

In 2012, Quebec laid the groundwork for regulating greenhouse gases through emissions trading. Such a system could in time become part of the emerging market for carbon in North America. However, it belongs to a category of economic instruments timidly explored in legal literature despite significant issues. This paper attempts to identify and explore some of these issues through a law and economics model built around the exchange of emission rights. This model reveals the close relationship between regulations and economic efficiency whenever the regulator turns to the market to protect the environment. Thus, it uncovers frictions likely to occur at various stages of the exchange of emission rights and impact its economic efficiency. It also offers four preliminary recommendations to the regulator with respect to the implementation of the Quebec capand-trade system for greenhouse gas emission allowances.