Addressing Climate Change with a Comprehensive Us Cap-and-Trade System
Posted: 7 Nov 2008
Date Written: Summer 2008
Abstract
There is growing impetus for a domestic US climate policy that can provide meaningful reductions in emissions of carbon dioxide (CO) and other greenhouse gases. I describe and analyse an up-stream, economy-wide CO cap-and-trade system which implements a gradual trajectory of emissions reductions (with inclusion over time of non-CO greenhouse gases), and includes mechanisms to reduce cost uncertainty. Initially, half of the allowances are allocated through auction and half through free distribution, with the share being auctioned gradually increasing to 100 per cent over 25 years. The system provides for linkage with emission-reduction credit projects in other countries, harmonization over time with effective cap-and-trade systems in other countries and regions, and appropriate linkage with actions taken in other countries, in order to establish a level playing field among domestically produced and imported products.
Keywords: cap-and-trade system, carbon dioxide, greenhouse gas emissions, global climate change, carbon taxes, Q540, Q280, Q380, Q480, Q580
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