The Enforcement Challenge of Cap-and-Trade Regulation

Abstract:     
The enforcement of a cap-and-trade program requires that the government know the mass emissions of all capped facilities, the whole quantity of their emissions over a given compliance period. An economy-wide cap and trade program addressing greenhouse gas emissions in the United States of the type proposed in the American Clean Energy and Security Act would bring with it formidable monitoring and enforcement challenges. This paper explains why accurate emissions data is so important to the success of a cap-and-trade program; discusses the methods available to obtain accurate emissions under a self-monitoring and reporting framework and recommends a cooperative federalism model of enforcement in which significant roles are played by the federal government, state government, citizen groups, and potentially third-party verification entities.

Number of Pages in PDF File: 36

Keywords: cap and trade regulation, greenhouse gases, enforcement, offsets, self-monitoring, self-reporting, cooperative federalism, citizen enforcement

JEL Classification: K23, K32

Accepted Paper Series