Birkat Kohanim: Daily, Weekly, Yom Tov
Birkat Kohanim is generally performed every day in Israel though there are a number of exceptions to this rule. Outside of Israel, however, there are a number of different customs as to when it is performed. In Ashkenazi congregations, Birkat Kohanim is only performed on Yom Tov, including Rosh Hashana and Yom Kippur. In most Sefardic congregations, Birkat Kohanim is performed every Shabbat, generally at Mussaf. In other Sefardic congregations, it is performed on any day that the Torah is read and there are even some that do so every single day, though the latter is not too widespread.
There have been attempts in the past among Ashkenazi communities in the Diaspora to re-institute Birkat Kohanim as a daily ritual. All such efforts, however, have repeatedly failed. In fact, it has been suggested that the inability to reinstitute Birkat Kohanim is the result of a Divine decree that it not take place on a daily basis in the Diaspora. Some Ashkenazi congregations have the mistaken custom to omit Birkat Kohanim when Yom Tov and Shabbat coincide. Such congregations are acting in error and should abolish this "custom". Although those in the Diaspora do not perform Birkat Kohanim on a daily basis, they are nevertheless included in, and benefit from, the Birkat Kohanim that is recited in Eretz Yisrael each day.
There are a number of reasons why Ashkenazi congregations in the Diaspora only perform Birkat Kohanim on Yom Tov. The most celebrated answer is that a Kohen is only permitted to perform the Birkat Kohanim when he is happy. It is taught that Jews in the Diaspora are never truly happy due to the many social, financial, and political pressures that are characteristic of life in the Diaspora. So too, no Jew can be truly happy living in Exile, far away from his God-given homeland. Even on Shabbat most people are distracted by their weekday pursuits and worries, and are not fully at peace. On Yom Tov, however, people are in a more festive mood, especially during the Mussaf service. As such, the custom evolved to only perform Birkat Kohanim on Yom Tov.
Another explanation offered for only performing Birkat Kohanim on Yom Tov is that it is preferable, if possible, for Birkat Kohanim to be performed by a Kohen who has recently immersed in a mikva. Since most people don’t immerse in a mikva on a daily basis, or even Erev Shabbat for that matter, Birkat Kohanim was deferred to Yom Tov when more people make an effort to immerse in a mikva before Yom Tov. There are a number of other explanations, as well.
As noted above, Birkat Kohanim is not performed everywhere in Israel on a daily basis. For example, many Ashkenazi congregations in Tzfat, Teveria, Haifa, and much of the north, only perform Birkat Kohanim at Mussaf on Shabbat and Yom Tov. In Sefardic congregations, and even some Ashkenazic ones, it is performed every day even in these places. In some Northern communities, Birkat Kohanim is only performed on days on which Mussaf is recited. The custom in Meron is to perform Birkat Kohanim every day.
The reason for the difference in custom between Northern Israel and the rest of the country might be due to the fact that some of the early settlers of the North were students of the Baal Shem Tov who were not in the habit of performing Birkat Kohanim every day. In fact, when they first arrived in Israel, they continued to observe the Diaspora custom of only performing Birkat Kohanim on Yom Tov. It was only as a sort of compromise between what they were used to, and the more common custom in Israel of performing Birkat Kohanim every day, that they later began performing it on Shabbat, as well. It is also suggested that the custom of Northern Israel might have evolved during a period when earthquakes, bandits, and other insecurities made life in the North difficult and people were not in the joyful mood that is required to perform Birkat Kohanim. Some authorities are of the opinion that Birkat Kohanim should be performed every day in all of Israel, even in the north, and that the custom of only performing it on Shabbat and Yom Tov should be eliminated.
 Yosef Ometz 70; Zera Emet 3:13.
 Ko Tevarchu 20:2.
 Mishna Berura 128:164; Kaf Hachaim, OC 128:16’ Tzitz Eliezer 7:6; Shemesh Umagen 50.
 Beit Yosef, OC 128; Rema, OC 128:44; Rama Mipano 95; Aruch Hashulchan, OC 128:64; Meishiv Davar 2:104. It is reported that Birkat Kohanim was performed daily in the synagogue of Rabbi Natan Adler in Frankfurt. Chut Hameshulash p. 20.
 Aruch Hashulchan ibid.
 Taz, OC 128:35; Aruch Hashulchan, OC 128:64; Shulchan Aruch Harav, OC 128:57; Kitzur Shulchan Aruch 100:1; Igrot Moshe, OC 3:18, 5:15.
 Teshuvot V'hanhagot 1:130; Piskei Teshuvot 128:57.
 Rema, OC 128:44.
 Sefer Chasidim 1613; Beit Yosef, OC 128.
 See Piskei Teshuvot 128:88 at length. See also: Maharil 21; Pe'at Sadecha 2:40; Zera Emet 3:13; Beit Ephraim 6 cited in Piskei Teshuvot.
 Shai Kohen 1:1; Ir Hakodesh V'hamikdash 3:25:2.
 Minchat Yitzchak 8:1,2.
 Piskei Teshuvot 128:91.
 See Piskei Teshuvot 128:90 at length.
 For a good overview on the customs of Birkat Kohanim in different parts of Eretz Yisrael see Piskei Teshuvot 128:90 and Az Nidberu 11:43.
 Devar Chevron 2:124.