Legal Frameworks for Greenhouse Gas Emissions Trading Markets: Global Developments and Emerging Challenges

Abstract

The greenhouse gas (GHG) emissions trading market has emerged as a central instrument in global climate governance over the past three decades. Grounded in the economic theory of pollution rights trading pioneered by Dales and Coase, emissions trading systems (ETS) translate environmental obligations into market mechanisms, enabling cost-effective emission reductions through the allocation and exchange of emission allowances. Notwithstanding their theoretical elegance, ETS legal frameworks face profound challenges: establishing legally robust allowance allocation regimes, ensuring market integrity against fraud and manipulation, resolving conflicts between domestic regulatory sovereignty and international market linkage commitments, and adapting legacy legal structures to accommodate novel market actors and instruments. This paper examines the international legal foundation of GHG emissions markets, analyses the European Union Emissions Trading System as the most mature legislative model, surveys emerging frameworks in China and Vietnam, and identifies four core legal dilemmas that transcend jurisdictional boundaries. Drawing on the theory of adaptive governance, the paper argues that effective ETS law requires a dynamic, multi-level architecture capable of responding to technological change, evolving scientific knowledge, and shifting geopolitical realities, without sacrificing the legal certainty that market participants require.