Markets can fail. But market mechanisms are often the best way for governments to address such failures. This has been demonstrated in areas from air pollution to traffic congestion to spectrum allocation to cigarette consumption. Markets for emission allowances – in which those firms that can cheaply cut pollution trade with those that cannot – achieve desired environmental goals at relatively low economic costs. As of a decade ago, that long-standing economic proposition had become widely recognized and put into action. Yet the political tide on both sides of the Atlantic has been against “cap and trade” over the last five years.