An Evaluation of Cap-and-Trade Programs for Reducing U.S. Carbon Emissions
Abstract
Climate change has emerged as an important public policy issue, although the prospects for an international agreement on climate policy are unclear. Several Members of Congress and public interest groups have proposed plans to encourage or require cuts in the United States' emissions of carbon dioxide, which affect the Earth's climate. This Congressional Budget Office (CBO) study-prepared at the request of the Senate Committee on Environment and Public Works-examines four proposals for reducing those emissions. Each proposal is a variant of a "cap-and-trade" program, in which policymakers would set a mandatory cap on emissions of carbon dioxide and provide companies with economic incentives to reach that cap at the lowest possible cost. This study evaluates the four proposals using various criteria, including ease of implementation, degree of certainty about achieving the target level of emissions, cost-effectiveness, and distributional effects. The analysis shows how key decisions in the design of cap-and-trade programs affect their performance relative to those criteria. No single proposal stands out in terms of all the criteria considered. Which option policymakers might prefer, if they chose to take action at all, would depend on how they weighed the various performance criteria.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jun 01, 2001
- Accession Number
- ADA391967
Entities
People
- Terry Dinan
Organizations
- Congressional Budget Office