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Issues in Designing U.S. Climate Change Policy

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  • Aldy, Joseph E.

    ()
    (Resources for the Future)

  • Pizer, William A.

Abstract

Over the coming decades, the cost of U.S. climate change policy likely will be comparable to the total cost of all existing environmental regulation—perhaps 1–2 percent of national income. In order to avoid higher costs, policy efforts should create incentives for firms and individuals to pursue the cheapest climate change mitigation options over time, among all sectors, across national borders, and in the face of significant uncertainty. Well-designed national greenhouse gas mitigation policies can serve as the foundation for global efforts and as an example for emerging and developing countries. We present six key policy design issues that will determine the costs, cost-effectiveness, and distributional impacts of domestic climate policy: program scope, cost containment, offsets, revenues and allowance allocation, competitiveness, and R&D policy. We synthesize the literature on these design features, review the implications for the ongoing policy debate, and identify outstanding research questions that can inform policy development.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-08-20.

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Date of creation: 23 Jun 2008
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Handle: RePEc:rff:dpaper:dp-08-20

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Keywords: cap-and-trade; carbon tax; cost containment; competitiveness;

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References

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Citations

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Cited by:
  1. Arik Levinson, 2011. "Belts and Suspenders: Interactions among Climate Policy Regulations," NBER Chapters, in: The Design and Implementation of U.S. Climate Policy, pages 127-140 National Bureau of Economic Research, Inc.
  2. Davidsdottir, B. & Fisher, M., 2011. "The odd couple: The relationship between state economic performance and carbon emissions economic intensity," Energy Policy, Elsevier, vol. 39(8), pages 4551-4562, August.
  3. Copenhagen Economics, 2008. "Reduced VAT for environmentally friendly products," Taxation Studies 0025, Directorate General Taxation and Customs Union, European Commission.
  4. Giménez, Eduardo L. & Rodríguez, Miguel, 2010. "Reevaluating the first and the second dividends of environmental tax reforms," Energy Policy, Elsevier, vol. 38(11), pages 6654-6661, November.
  5. Michael I. Cragg & Matthew E. Kahn, 2009. "Carbon Geography: The Political Economy of Congressional Support for Legislation Intended to Mitigate Greenhouse Gas Production," NBER Working Papers 14963, National Bureau of Economic Research, Inc.
  6. Grischa Perino, 2010. "Technology Diffusion with Market Power in the Upstream Industry," University of East Anglia Applied and Financial Economics Working Paper Series 005, School of Economics, University of East Anglia, Norwich, UK..
  7. Meredith Fowlie & Christopher R. Knittel & Catherine Wolfram, 2012. "Sacred Cars? Cost-Effective Regulation of Stationary and Nonstationary Pollution Sources," American Economic Journal: Economic Policy, American Economic Association, vol. 4(1), pages 98-126, February.
  8. Meredith Fowlie & Christopher R. Knittel & Catherine Wolfram, 2008. "Sacred Cars? Optimal Regulation of Stationary and Non-stationary Pollution Sources," NBER Working Papers 14504, National Bureau of Economic Research, Inc.

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