FEEM working papers "Note di lavoro" series
2008 .067

Addressing Climate Change with a Comprehensive U.S. Cap-and-Trade System


Authors: Robert N. Stavins
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Cap-and-Trade System,Carbon Dioxide,Greenhouse Gas Emissions,Global Climate Change,Carbon Taxes
JEL n.: Q540,Q280,Q380,Q480,Q580
JEL: Oxford Review of Economic Policy
Pages: Vol. 24, No.2, pp.298-321
Date: 2008

Abstract

There is growing impetus for a domestic U.S. climate policy that can provide meaningful reductions in emissions of CO2 and other greenhouse gases. I describe and analyze 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 percent 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.

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