In this paper, the following key issues are addressed: the so-called “South” – the Group of 77 and China – and how to engage their interest and commitment; the purported savings if the flexible mechanisms are availed of, and the macro-economic impacts of meeting the Kyoto objectives; the associated issues of narrowing the extent and scope for such trading by setting a limit on how much can be traded, and “hot air” – the surplus quota above their own projected needs which Russia and most of the old Soviet Union have to offer; operational issues, including units to be traded, monitoring and enforcement, allocation of permits, competitiveness and risk management; in the case of emissions trading, the initial allocation of permits.
