Journal Article

Cap-and-trade: a sufficient or necessary condition for emission reduction?

Michael Hanemann

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 26, issue 2, pages 225-252
Published in print January 2010 | ISSN: 0266-903X
Published online January 2010 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/grq015
Cap-and-trade: a sufficient or necessary condition for emission reduction?

More Like This

Show all results sharing these subjects:

  • Economic Development and Growth
  • Public Economics
  • Political Economy
  • Public Policy

GO

Show Summary Details

Preview

Influenced by the success of emission trading in the US for sulphur dioxide (SO2), some economists have argued for an upstream, economy-wide cap-and-trade scheme as the primary tool for achieving the required reduction in greenhouse gas (GHG) emissions. This paper addresses that argument and concludes that cap-and-trade will need to be accompanied by complementary regulatory measures. While it is a necessary component in a climate mitigation programme, it is unlikely to be sufficient by itself to accomplish the desired emission reductions. The paper reviews the evidence on how SO2 emissions were reduced and the extent to which actual emission trading was responsible for the reduction as opposed to other innovations. It also identifies differences between the past regulation of SO2 and other air pollutants and the challenges presented by the regulation of GHG emissions. What actually happened in the US with SO2 emission trading deviated in several significant respects from what would be predicted based on the conventional theoretical analysis. While there was a dramatic reduction in SO2 emissions, it occurred because of several factors, some of which are unlikely to apply for GHG emissions, and others of which argue for an activist regulatory policy by the government as a complement to the functioning of an emissions market for GHGs.

Keywords: climate change; emission trading; pollution control; H23; Q54; Q58

Journal Article.  16203 words. 

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

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.