The Prime Minister has announced that Australia will have a tradable credit regime for the management of Greenhouse gases by 2011. The scheme will be developed from the proposals made by the Prime Ministers Task Group on Emissions Trading. These proposals represent a prototype. However, the Task Group’s report does not make this prototype’s theoretical basis explicit, which disables attempts to evaluate the promises of the scheme and identify future implementation issues. This paper examines the prototype against elements of the institutional theory of political science and micro economic theory to expose some of the principles upon which the proposal operates and draw out implications that will need to be addressed in implementation. In particular, it identifies the need for early specification of an overall target for Greenhouse gas emissions and some of the implications of that target for investment in new technology. In addition, the span of industries and organisations to be ruled by the scheme or exempted is still to be determined. The evaluation also observes a convergence between the Australian approach and that of the world as represented by the Kyoto Protocol.