It sounds attractive - does it work as a way of dealing with climate change?

Trading, whether between companies or countries, only works if emissions are reduced enough to contain global warming. Creating a market does not, by itself, reduce emissions.
Moreover, the benefits could be severely limited if trading is not comprehensive.
As important as what or who is included is what is not included.
Carbon dioxide represents only part - albeit a crucial part; more than 70% - of all greenhouse gases.
Furthermore, the US, the world's largest CO2 polluter, excluded itself by choosing not to ratify Kyoto.
And while the US is the biggest emitter today, China, which is projected to exceed the US in emissions by mid century, has no obligation to reduce emissions.
Even within trading schemes such as the ETS, whole sectors' emissions are excluded, such as transport, homes and the public sector.
Aviation is the fastest-growing source of CO2 emissions, and some experts have calculated that if it were included, the UK's entire allowance would soon be used up.
Critics say trading carbon condones the idea of "business as usual" and fails to emphasise the need to invest in renewable energies and move away from fossil fuels.
Trading, while it may acknowledge the threat posed by global warming, does not address the seriousness and scale of the problem, argue environmentalists.
For trading to work it would have to become much broader - perhaps even embracing personal carbon allowances for individuals, some say.
More and more scientists are saying that the carbon dioxide ceilings under the treaty are too high - perhaps far too high - to help avert serious climate change.

http://officialglobalwarming.blogspot.com/