This document – produced by the World Wildlife Fund – provides a good concise overview of the Emissions Trading Scheme being used to reduce greenhouse gas emissions in the European Union.
In addition to outlining the basic design of the system, the document describes some of the errors of implementation that have occurred. The biggest of those were probably the over-allocation of permits and their free distribution, as opposed to auctioning. Together, these sharply reduced the effectiveness of the system during its first phase of operations. Hopefully, lessons learned during this period will help to make future emission trading schemes work more efficiently and equitably.