Well, now that we're past etymology,
Rich Sweeney at Common Tragedies wrote an interesting post on 18 February 2009, entitled, The Problem with Grandfathering Permits which highlights a major challenge related to running cap and trade systems -- notably the issuance of permits based on past emissions. He notes that:
... one of the problems with output based permit allocation is that it creates an incentive for actors to alter their behavior in the period(s) prior to setting the allocation. For example, if carbon permits were simply given out proportionally based on firms’ share of total carbon emissions in the previous year, there would be a huge incentive to be as dirty as possible.
Knowing that their allowances could be based on their emissions the year before the scheme was implemented, polluters might ramp up their emissions so they could have the largest allowance possible.
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