One major objective of the introduction of emissions trading in the European Union was to promote innovation towards mitigating climate change. Focusing on the German electricity industry, this book analyses from a theoretical and an empirical perspective the extent to which this objective has been achieved and how the design of the trading scheme could be improved to this end. The theoretical analysis was largely based on an algebraic model which allowed for comparison of the relevant companies profits under various configurations of the design options. The empirical analysis was grounded on...