Design Principles of a Cap and Trade System for Greenhouse Gases

Abstract

Until recently, the question of regulating greenhouse gases was a question for nations. Over the past few years an increasing number of states and municipalities have shown an interest in grappling with climate change. This paper attempts to help states, and specifically California, to formulate an effective cap-and-trade program by highlighting the most important design features and the tradeoffs associated with policy alternatives.

Keywords: Climate change, global warming, Kyoto, California, cap-and-trade, environment, greenhouse gas

JEL Classification: K32, K23, L50, Q28, Q38, Q48, Q25