Because of its cost -effectiveness a nd environmental quality assurance,emission trading is the most prospecting idea under the total -am ount -control target.Based on the re view of the practices of emission tra ding(ET)in western countries,this article s howed that transaction cost is a crucial factor in the implementation of ET,demonstrated the effects of transac tion cost on the performance of tradable -permit markets by introducing i t into the basic model,and discussed the issues in policy design for tradable -perm it system from the point of transacti on cost.