1.The European Union Emissions Trading Scheme (EU ETS) has the ambition to become a blueprint for the world.The EU ETS started with an allocation based on historical grandfathering for phase 1 (2005-2007) and phase 2 (2008-2012), which has been seen as a failure.Therefore phase 3 (2013-2020) will be based on full auctioning for electricity generation and a benchmark-based allocation for industry.The legislation allows the European Member States for a financial compensation of the increase of electricity prices caused by the EU ETS.This compensation is flawed and inherently unstable, no basis for business investment decisions.The creation of industry benchmarks was the most important progress.However, the allocation with benchmarks is still ex-ante fixed, based on historical production.An ex-ante fixed allocation suffers from three problems: (1) over-allocation during economic crisis, (2) possible windfall profits and (3) an incentive for carbon leakage.The ex-ante approach led to many detailed allocation rules (600+ pages, partly not legally binding), which are terribly complex, arbitrary, often illogical, partly contradictory and not effective.The EU ETS is under fire: the ex-ante allocation caused over-allocation and collapse of the carbon price because of the two financial crises.The solution is simple, robust, predictable, recession-proof and effective: ex-post providing the direct link to actual production.Then producers can neither get an unjustified shortage nor an unjustified overhang of allowances.There can be no windfall profits and no incentive for production or investment carbon leakage.2.Lessons for emerging GHG trading schemes, like for China.Until a global auctioning system,a benchmark based allocation is advised.It is vital to avoid the pitfall of an ex-ante frozen allocation.Benchmark instead of auctioning can be considered for electricity to have the lowest impact on electricity prices.