The aim of this research was to investigate the long-run relationship between economic growth and environmental quality through empirical research and use of game theoretic analysis. Objectives I) To investigate the contribution of the European Union Emissions Trading System (EU ETS) to the EU Targets achievement; II) To indicate the role of a market-based mechanism to the mitigation of the bad effects of the Climate Change; III) To examine whether the market and its laws can be fully substituted for regulation; IV) To discover the optimum solution to the environmental problem. Conclusions I) The mitigation of emissions was due mostly to the decreased economic activity because of the economic crisis rather than to the EU ETS’ s contribution; II) Bad implementation of the EU ETS led to the conclusion that it’s an inefficient mechanism; III) Market-based mechanisms aren’t inefficient but have to be regulated so as market failures to be corrected.