Journal Article

Addressing climate change with a comprehensive US cap-and-trade system

Robert N. Stavins

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 24, issue 2, pages 298-321
Published in print January 2008 | ISSN: 0266-903X
Published online January 2008 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/grn017
Addressing climate change with a comprehensive US cap-and-trade system

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There is growing impetus for a domestic US climate policy that can provide meaningful reductions in emissions of carbon dioxide (CO2) and other greenhouse gases. I describe and analyse an up-stream, economy-wide CO2 cap-and-trade system which implements a gradual trajectory of emissions reductions (with inclusion over time of non-CO2 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

Journal Article.  12464 words. 

Subjects: Economic Development and Growth ; Public Economics ; Political Economy ; Public Policy

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