The politics of "Cap and trade" policies

This article explores the fundamentally political nature of cap and trade resource management policies. It disaggregates these policies into their three main processes (capping, allocation, and trading) and outlines the distinctive distributive conflicts characteristic of each. The Murray-Darling Cap on Diversions in southeastern Australia serves as a detailed case study used to highlight these conflicts, and evidence drawn from other cap and trade programs around the world supports these observations. Recognizing the politics of cap and trade policies helps to explain why these programs do not always follow economic models and clarifies the roles of governments and stakeholders in program design and operation.