Background Poor air quality is a growing problem in Lombardia, and environmental standards are not being met. The current levels of CO2, NOx and SO2 show that short-term environmental policies are no longer effective and that a more integrated environmental and economic approach must be adopted. The emissions trading scheme, which has already been applied to CO2 emissions, offers a way forward. The scheme can greatly improve awareness of pollution problems. Objectives The main objective of the project was to extend the use of the emission trading scheme to include air pollutants such as NOx and SO2, and to create an innovative approach to air quality control in Lombardia. The project planned the following tasks: • Establish a framework of the environmental, economic, social and normative constraints in developing an emissions trading scheme at regional and sub-regional level in Lombardia for air quality control; • Aid companies to improve their environmental performances by raising awareness of CO2, NOx,SO2 emissions trading and the benefits of its implementation; • Assess the environmental and economic effects of the introduction of a selected model of emission trading at a regional level and its efficiency for air quality control; • Simulate a marketplace of emissions trading with a pool of the participating companies; • Participate in the international, EU and national debate on methods and tools for the development of an emission trading market and; • Create a network of European and Italian authorities (at national and local level) which have introduced or aim to introduce the emission trading mechanism. Results The project piloted an integrated framework for an emission trading scheme at a regional level involving local companies. This framework required the creation of a specific software for emission trading. Several other public authorities will also test this pilot software, but the project concluded that the European Commission should encourage the adoption/distribution of this tested software for emission trading. The beneficiary published scientific articles in support of its findings and presented results at workshops. The pilot also led to the improvement of regional environmental policies in the emission trading sector, and the bulk of the project activities will be continued by the beneficiary and other public authorities after the end of the project. The socio-economic effects of the project are fairly limited, however. It was not expected to have a direct impact on employment, but some positive indirect impacts can be recorded at a University and regional level, as a result of the project’s positive follow-up. The project coincided with the first period of enforcement of some key EU directives concerning the emission trading sector (e.g. Dir.2003/87 and Dir. 2004/101), and the start of the Kyoto Protocol on climate change. The project proved to be valuable in offering a pilot test for the likely impacts of such emissions markets at local/regional scale will have on major air pollutants. It also was able to assist public authorities and relevant stakeholders in raising their awareness and understanding of important socio-economic issues. The project helped to underline some elements that would aid the implementation of the directives (e.g. poor information to firms and positive ancillary impacts for NOx emissions).