Number: RL33799
Title: Climate Change: Design Approaches for a Greenhouse Gas Reduction Program
Authors: Larry Parker, Resources, Science, and Industry Division 
Abstract: Because a stalemate has persisted on strategies to control greenhouse gas (GHG) emissions, particularly because of cost uncertainties, attention has increasingly focused on options to address these concerns and to move the debate forward. These options range from incremental mechanisms within a tradeable permit program, such as banking and borrowing of credits, which minimally affect overall emissions reduction targets, to more fundamental proposals, such as a carbon tax, which would take climate change policy in a new and somewhat uncharted direction. This paper explores these options to address the cost issue in four parts. First, the basic economic tradeoff between controlling the quantity of GHG emissions and the program's compliance costs is introduced and explained. Second, the five dimensions of the cost issue that have arisen so far in the climate change debate are identified and discussed. Third, a representative sample of proposed approaches to address cost concerns is compared and analyzed according to the five cost dimensions identified previously. Finally, the proposed options are summarized and opportunities to combine or merge different approaches are analyzed. The paper does not provide a detailed discussion of allocation and implementation issues that creating a market-based mechanism (particularly a cap-and-trade program) would entail.
Pages: 27
Date: November 24, 2008