Since January 2005, Directive 2003/87/EC has been in force, implementing a trading system for emission certificates at the European level for energy-intensive industries. Katja Zwingmann conducts an economic analysis of this so-called emissions trading directive, with particular emphasis on the primary allocation of certificates. The design of the primary allocation raises not only distribution policy issues but also efficiency questions, as only an efficient primary allocation leads to a functioning market. The author examines various forms of certificate allocation and investigates whether the European allocation procedure or the German national implementation is economically efficient. She concludes that only an auction of the certificates leads to the desired outcome and recommends this approach given the current composition of participants.