Emission trading schemes like the European Union Emissions Trading System (EUETS) try to reconcile economic efficiency and ecological efficiency by creating financial incentives for companies to invest in climate-friendly innovations. Using real options methodology we demonstrate that under uncertainty economic and ecological efficiency are still mutually exclusive. This problem is even tighten...

Economic efficiency implies an equating, at the margin, of benefits and costs. In this paper we explore a concept of "efficiency" which is broader than the usual framework and which applies to commodities and services produced and distributed largely outside the private, profit maximizing sector. An assessment of the economic efficiency of producing such a commodity requires the determination o...