Argument: Companies will pollute as much as possible before start of carbon trading

Issue Report: Cap-and-trade versus carbon tax

Extended argument

The initial distribution/auction of pollution credits would be based on the current levels of pollution in the firms. It would be of interest to firms to increase their pollution before the start of carbon trading, so that later they could expand pollution at no cost, or auction of access credits.

This can be easily countered by setting the pollution credits at a historic level (e.g. 1 year prior the start of carbon trading.). This leaves the initial credit levels outside the control of the firms.