diff --git a/main.gms b/main.gms
index 1b15f37a62..93c97bee49 100755
--- a/main.gms
+++ b/main.gms
@@ -812,12 +812,23 @@ parameter
 *' *  (3): all GHG excl CO2 emissions from LULUCF
 *'
 parameter
-  cm_permittradescen        "scenario on permit trade"
+  cm_permittradescen        "Scenario on permit trade, not used in the TradingOnRef realisation"
 ;
   cm_permittradescen  = 1;         !! def = 1  !! regexp = [1-3]
 *' *  (1): full permit trade (no restrictions)
 *' *  (2): no permit trade (only domestic mitigation)
-*' *  (3): limited trade (certain percentage of GDP)
+*' *  (3): limited trade (certain percentage of permits)
+*'
+
+parameter
+  cm_permitTradeFinalYr        "[TradingOnRef] Year until permit trading is allowed"
+;
+  cm_permitTradeFinalYr  = 2100;         !! def = 2100
+*'  
+parameter
+  cm_permitTradeRatio        "[TradingOnRef] Share of emissions allowed for permit trading between 0 and 1"
+;
+  cm_permitTradeRatio  = 0.2;         !! def = 0.2  
 *'
 parameter
   cm_rentdiscoil            "[grades2poly] discount factor for the oil rent"
diff --git a/modules/41_emicapregi/AbilityToPay/not_used.txt b/modules/41_emicapregi/AbilityToPay/not_used.txt
index 009a793d19..3131f6520b 100644
--- a/modules/41_emicapregi/AbilityToPay/not_used.txt
+++ b/modules/41_emicapregi/AbilityToPay/not_used.txt
@@ -10,3 +10,5 @@ pm_gdp_gdx, parameter, ???
 pm_budgetCO2eq, parameter, ???
 vm_co2eqGlob,input,questionnaire
 cm_emiscen,input,questionnaire
+cm_permitTradeFinalYr, input, ???
+cm_permitTradeRatio, input, ???
diff --git a/modules/41_emicapregi/CandC/not_used.txt b/modules/41_emicapregi/CandC/not_used.txt
index e7413e8496..b3699610aa 100644
--- a/modules/41_emicapregi/CandC/not_used.txt
+++ b/modules/41_emicapregi/CandC/not_used.txt
@@ -13,3 +13,5 @@ pm_budgetCO2eq, parameter, ???
 pm_shPPPMER,input,questionnaire
 pm_gdp,input,questionnaire
 cm_permittradescen,input,questionnaire
+cm_permitTradeFinalYr, input, ???
+cm_permitTradeRatio, input, ???
diff --git a/modules/41_emicapregi/GDPint/not_used.txt b/modules/41_emicapregi/GDPint/not_used.txt
index 22f931e772..4a39a3e606 100644
--- a/modules/41_emicapregi/GDPint/not_used.txt
+++ b/modules/41_emicapregi/GDPint/not_used.txt
@@ -13,3 +13,5 @@ pm_budgetCO2eq, parameter, ???
 pm_shPPPMER,input,questionnaire
 pm_gdp,input,questionnaire
 cm_permittradescen,input,questionnaire
+cm_permitTradeFinalYr, input, ???
+cm_permitTradeRatio, input, ???
diff --git a/modules/41_emicapregi/POPint/not_used.txt b/modules/41_emicapregi/POPint/not_used.txt
index 1f082f491d..f3df1eafc1 100644
--- a/modules/41_emicapregi/POPint/not_used.txt
+++ b/modules/41_emicapregi/POPint/not_used.txt
@@ -11,3 +11,5 @@ vm_Mport,input,questionnaire
 pm_shPPPMER,input,questionnaire
 pm_gdp,input,questionnaire
 cm_permittradescen,input,questionnaire
+cm_permitTradeFinalYr, input, ???
+cm_permitTradeRatio, input, ???
\ No newline at end of file
diff --git a/modules/41_emicapregi/PerCapitaConvergence/not_used.txt b/modules/41_emicapregi/PerCapitaConvergence/not_used.txt
index 78c95ab216..7f60d3e45d 100644
--- a/modules/41_emicapregi/PerCapitaConvergence/not_used.txt
+++ b/modules/41_emicapregi/PerCapitaConvergence/not_used.txt
@@ -12,3 +12,5 @@ vm_co2eqGlob,input,questionnaire
 pm_shPPPMER,input,questionnaire
 pm_gdp,input,questionnaire
 cm_emiscen,input,questionnaire
+cm_permitTradeFinalYr, input, ???
+cm_permitTradeRatio, input, ???
\ No newline at end of file
diff --git a/modules/41_emicapregi/TradingOnRef/bounds.gms b/modules/41_emicapregi/TradingOnRef/bounds.gms
new file mode 100755
index 0000000000..ee62ca0773
--- /dev/null
+++ b/modules/41_emicapregi/TradingOnRef/bounds.gms
@@ -0,0 +1,23 @@
+*** |  (C) 2006-2024 Potsdam Institute for Climate Impact Research (PIK)
+*** |  authors, and contributors see CITATION.cff file. This file is part
+*** |  of REMIND and licensed under AGPL-3.0-or-later. Under Section 7 of
+*** |  AGPL-3.0, you are granted additional permissions described in the
+*** |  REMIND License Exception, version 1.0 (see LICENSE file).
+*** |  Contact: remind@pik-potsdam.de
+*** SOF ./modules/41_emicapregi/TradingOnRef/bounds.gms
+
+*** calculate emission cap in absolute terms
+vm_perm.fx(t,regi) = p41_co2eq(t,regi);
+
+display vm_perm.up;
+
+vm_Xport.fx(t,regi,"perm") = 0;
+vm_Mport.fx(t,regi,"perm") = 0;
+
+*** Only activate permit trade between 2030 and cm_permitTradeFinalYr
+*** cm_permitTradeRatio determines the proportion of emissions that can be traded,
+*** between 0 (no permit trade allowed) and 1 (all emissions can be traded)
+vm_Xport.up(t,regi,"perm") $ (t.val > 2025 and t.val <= cm_permitTradeFinalYr) = cm_permitTradeRatio * abs(p41_co2eq(t,regi));
+vm_Mport.up(t,regi,"perm") $ (t.val > 2025 and t.val <= cm_permitTradeFinalYr) = cm_permitTradeRatio * abs(p41_co2eq(t,regi));
+
+*** EOF ./modules/41_emicapregi/TradingOnRef/bounds.gms
diff --git a/modules/41_emicapregi/TradingOnRef/datainput.gms b/modules/41_emicapregi/TradingOnRef/datainput.gms
new file mode 100755
index 0000000000..6ca8b2bb39
--- /dev/null
+++ b/modules/41_emicapregi/TradingOnRef/datainput.gms
@@ -0,0 +1,22 @@
+*** |  (C) 2006-2024 Potsdam Institute for Climate Impact Research (PIK)
+*** |  authors, and contributors see CITATION.cff file. This file is part
+*** |  of REMIND and licensed under AGPL-3.0-or-later. Under Section 7 of
+*** |  AGPL-3.0, you are granted additional permissions described in the
+*** |  REMIND License Exception, version 1.0 (see LICENSE file).
+*** |  Contact: remind@pik-potsdam.de
+*** SOF ./modules/41_emicapregi/TradingOnRef/datainput.gms
+
+
+*** read in data of cost-optimal reference climate policy run
+*' load CO2 emissions from reference run to assing the allocates permits
+
+Execute_Loadpoint "input_ref" p41_co2eq_in = vm_emiAll.l;
+p41_co2eq(t, regi) = p41_co2eq_in(t,regi,"co2");
+
+
+*** initialization of pm_shPermit
+pm_emicapglob(t) = sum(regi, p41_co2eq(t,regi));
+pm_shPerm(t,regi) = p41_co2eq(t,regi) / pm_emicapglob(t);
+
+		 
+*** EOF ./modules/41_emicapregi/TradingOnRef/datainput.gms
diff --git a/modules/41_emicapregi/TradingOnRef/declarations.gms b/modules/41_emicapregi/TradingOnRef/declarations.gms
new file mode 100755
index 0000000000..37ad76b9ab
--- /dev/null
+++ b/modules/41_emicapregi/TradingOnRef/declarations.gms
@@ -0,0 +1,20 @@
+*** |  (C) 2006-2024 Potsdam Institute for Climate Impact Research (PIK)
+*** |  authors, and contributors see CITATION.cff file. This file is part
+*** |  of REMIND and licensed under AGPL-3.0-or-later. Under Section 7 of
+*** |  AGPL-3.0, you are granted additional permissions described in the
+*** |  REMIND License Exception, version 1.0 (see LICENSE file).
+*** |  Contact: remind@pik-potsdam.de
+*** SOF ./modules/41_emicapregi/TradingOnRef/declarations.gms
+
+variables
+vm_perm(ttot,all_regi)                          "emission allowances [GtCeq]"
+;
+
+parameter
+pm_shPerm(tall, all_regi)                       "emission permit shares [share]"
+pm_emicapglob(tall)                             "global emission cap [GtC]" 
+p41_co2eq_in(ttot,all_regi,all_enty)            "emissions from cost-optimal reference run"
+p41_co2eq(ttot,all_regi)                        "emissions from cost-optimal reference run"
+;
+
+*** EOF ./modules/41_emicapregi/TradingOnRef/declarations.gms
diff --git a/modules/41_emicapregi/TradingOnRef/not_used.txt b/modules/41_emicapregi/TradingOnRef/not_used.txt
new file mode 100755
index 0000000000..f8db314466
--- /dev/null
+++ b/modules/41_emicapregi/TradingOnRef/not_used.txt
@@ -0,0 +1,19 @@
+# |  (C) 2006-2024 Potsdam Institute for Climate Impact Research (PIK)
+# |  authors, and contributors see CITATION.cff file. This file is part
+# |  of REMIND and licensed under AGPL-3.0-or-later. Under Section 7 of
+# |  AGPL-3.0, you are granted additional permissions described in the
+# |  REMIND License Exception, version 1.0 (see LICENSE file).
+# |  Contact: remind@pik-potsdam.de
+name, type, reason
+sm_budgetCO2eqGlob, parameter, ???
+pm_gdp_gdx, parameter, ???
+pm_budgetCO2eq, parameter, ???
+vm_co2eqGlob,input,questionnaire
+cm_emiscen,input,questionnaire
+p41_precorrection_reduction, parameter, ???
+p41_correct_factor, parameter, ???
+pm_shPPPMER,input,questionnaire
+pm_pop, parameter, ???
+pm_gdp,input,questionnaire
+p41_co2eq_bau, parameter, ???
+cm_permittradescen,input,replaced by cm_permitTradeRatio
\ No newline at end of file
diff --git a/modules/41_emicapregi/TradingOnRef/realization.gms b/modules/41_emicapregi/TradingOnRef/realization.gms
new file mode 100755
index 0000000000..86759e4cae
--- /dev/null
+++ b/modules/41_emicapregi/TradingOnRef/realization.gms
@@ -0,0 +1,24 @@
+*** |  (C) 2006-2024 Potsdam Institute for Climate Impact Research (PIK)
+*** |  authors, and contributors see CITATION.cff file. This file is part
+*** |  of REMIND and licensed under AGPL-3.0-or-later. Under Section 7 of
+*** |  AGPL-3.0, you are granted additional permissions described in the
+*** |  REMIND License Exception, version 1.0 (see LICENSE file).
+*** |  Contact: remind@pik-potsdam.de
+*** SOF ./modules/41_emicapregi/TradingOnRef/realization.gms
+
+*' @description: Emission caps/permits are allocated according to a reference run
+*' There are three different trade patterns currently available.
+*'     cm_permittradescen  = 1;         !! def = 1  !! regexp = [1-3]
+*' *  (1): full permit trade (no restrictions)
+*' *  (2): no permit trade (only domestic mitigation)
+*' *  (3): limited trade (certain percentage of regional allowances)
+*'         for limited trade use cm_permitTradeFinalYr   to set the final year until permit trading is allowed
+*'         with cm_permitTradeRatio set the percentage of allowed trade
+
+
+*####################### R SECTION START (PHASES) ##############################
+$Ifi "%phase%" == "declarations" $include "./modules/41_emicapregi/TradingOnRef/declarations.gms"
+$Ifi "%phase%" == "datainput" $include "./modules/41_emicapregi/TradingOnRef/datainput.gms"
+$Ifi "%phase%" == "bounds" $include "./modules/41_emicapregi/TradingOnRef/bounds.gms"
+*######################## R SECTION END (PHASES) ###############################
+*** EOF ./modules/41_emicapregi/TradingOnRef/realization.gms
diff --git a/modules/41_emicapregi/exog/not_used.txt b/modules/41_emicapregi/exog/not_used.txt
index ad24171408..5e9156d090 100644
--- a/modules/41_emicapregi/exog/not_used.txt
+++ b/modules/41_emicapregi/exog/not_used.txt
@@ -16,3 +16,5 @@ cm_emiscen, switch, ???
 pm_shPPPMER,input,questionnair
 pm_gdp,input,questionnaire
 cm_permittradescen,input,questionnaire
+cm_permitTradeFinalYr, input, ???
+cm_permitTradeRatio, input, ???
diff --git a/modules/41_emicapregi/module.gms b/modules/41_emicapregi/module.gms
index e8e89b5406..14ae2e4d0e 100644
--- a/modules/41_emicapregi/module.gms
+++ b/modules/41_emicapregi/module.gms
@@ -26,6 +26,7 @@ $Ifi "%emicapregi%" == "CandC" $include "./modules/41_emicapregi/CandC/realizati
 $Ifi "%emicapregi%" == "GDPint" $include "./modules/41_emicapregi/GDPint/realization.gms"
 $Ifi "%emicapregi%" == "POPint" $include "./modules/41_emicapregi/POPint/realization.gms"
 $Ifi "%emicapregi%" == "PerCapitaConvergence" $include "./modules/41_emicapregi/PerCapitaConvergence/realization.gms"
+$Ifi "%emicapregi%" == "TradingOnRef" $include "./modules/41_emicapregi/TradingOnRef/realization.gms"
 $Ifi "%emicapregi%" == "exog" $include "./modules/41_emicapregi/exog/realization.gms"
 $Ifi "%emicapregi%" == "none" $include "./modules/41_emicapregi/none/realization.gms"
 *###################### R SECTION END (MODULETYPES) ############################
diff --git a/modules/41_emicapregi/none/not_used.txt b/modules/41_emicapregi/none/not_used.txt
index f08fbec934..2ae02ab04f 100644
--- a/modules/41_emicapregi/none/not_used.txt
+++ b/modules/41_emicapregi/none/not_used.txt
@@ -14,3 +14,5 @@ cm_emiscen, switch, ???
 pm_shPPPMER,input,questionnaire
 pm_gdp,input,questionnaire
 cm_permittradescen,input,questionnaire
+cm_permitTradeFinalYr, input, ???
+cm_permitTradeRatio, input, ???
diff --git a/modules/80_optimization/nash/datainput.gms b/modules/80_optimization/nash/datainput.gms
index 2588cb4055..c24ea97c16 100644
--- a/modules/80_optimization/nash/datainput.gms
+++ b/modules/80_optimization/nash/datainput.gms
@@ -37,7 +37,7 @@ cm_iteration_max = 100;
 ***convergences thresholds - very coarse 
   p80_surplusMaxTolerance(tradePe) = 2* 1.5 * sm_EJ_2_TWa;          !! convert EJ/yr into internal unit TWa
   p80_surplusMaxTolerance("good") = 2* 100/1000;                  !! in internal unit, trillion Dollar
-  p80_surplusMaxTolerance("perm") = 2* 300 * 12/44 / 1000;                !! convert MtCO2eq into internal unit GtC
+  p80_surplusMaxTolerance("perm") = 3* 300 * 12/44 / 1000;                !! convert MtCO2eq into internal unit GtC
    );
 );
     
@@ -54,12 +54,12 @@ p80_etaXp("perm") = 0.2;
 
 *LB* parameter for Nash price algorithm between different iterations
 p80_etaLT(trade) = 0;
-p80_etaLT("perm") = 0.03;
+p80_etaLT("perm") = 0.04;
 
 ***These parameters are pretty sensitive. If market surpluses diverge, try higher values (up to 1). If surpluses oscillate, try lower values. 
 p80_etaST(tradePe) = 0.3;
 p80_etaST("good") = 0.25;
-p80_etaST("perm") = 0.3;
+p80_etaST("perm") = 0.8;
 
 $ifi %banking% == "banking"  p80_etaST("perm") = 0.2;      !! in banking mode, the permit market reacts more sensitively.
 $ifi %emicapregi% == "budget"  p80_etaST("perm") = 0.25;      !! in budget mode, the permit market reacts more sensitively.
diff --git a/modules/80_optimization/nash/equations.gms b/modules/80_optimization/nash/equations.gms
index 8bc6b50d25..b7d46b2781 100644
--- a/modules/80_optimization/nash/equations.gms
+++ b/modules/80_optimization/nash/equations.gms
@@ -44,7 +44,7 @@ q80_costAdjNash(ttot,regi)$( ttot.val ge cm_startyear ) ..
 ;
 
 *' link between permit budget and  emission budget
-q80_budgetPermRestr(regi)$(cm_emiscen=6) ..
+q80_budgetPermRestr(regi)$(cm_emiscen=6 OR cm_emiscen = 4) ..
      sum(ttot$(ttot.val lt sm_endBudgetCO2eq and ttot.val ge cm_startyear), pm_ts(ttot)* vm_perm(ttot,regi))
      + sum(ttot$(ttot.val eq sm_endBudgetCO2eq),pm_ts(ttot)/2 * (vm_perm(ttot,regi)))  =l=
      pm_budgetCO2eq(regi) - sum(ttot $((ttot.val ge 2005) and (ttot.val lt cm_startyear)), pm_ts(ttot)* vm_co2eq(ttot,regi));
diff --git a/modules/80_optimization/nash/preloop.gms b/modules/80_optimization/nash/preloop.gms
index 9cf0c48be1..6600873cd9 100644
--- a/modules/80_optimization/nash/preloop.gms
+++ b/modules/80_optimization/nash/preloop.gms
@@ -61,11 +61,11 @@ loop(regi,
 if(p80_Mport0("2005",regi,tradePe) eq NA, p80_Mport0("2005",regi,tradePe) = 0);
 ););
 
-*AJS* starting policy runs from permit prices that are all zero doesnot work. start from 30$ price path instead
+*AJS* starting policy runs from permit prices that are all zero doesnot work. start from 49$ price path instead
 if((cm_emiscen ne 1) and (cm_emiscen ne 9) and (smax(t,pm_pvp(t,"perm"))) eq 0,
  loop(ttot$(ttot.val ge 2005),
-***this is a 30$/tCo2eq in 2020 trajectory:     
-	pm_pvp(ttot,"perm") = 0.11*1.05**(ttot.val-2020) * pm_pvp(ttot,"good");
+***this is a 49$/tCo2eq in 2020 trajectory ([T$/GtC]. To get $/tCO2, multiply with 272: 0.18 T$/GtC = 48.96 $/tCO2):     
+	pm_pvp(ttot,"perm") = 0.18*1.05**(ttot.val-2020) * pm_pvp(ttot,"good");
  );
  pm_pvp("2005","perm")=0;
 );