Issues in Designing U.S. Climate Change Policy

39 Pages Posted: 27 Feb 2009

See all articles by Joseph E. Aldy

Joseph E. Aldy

Harvard Kennedy School; National Bureau of Economic Research; Resources for the Future; Harvard University - Harvard Kennedy School (HKS)

William A. Pizer

Duke University

Date Written: June 23, 2008

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.

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

JEL Classification: Q48, Q54, Q58

Suggested Citation

Aldy, Joseph E. and Pizer, William A., Issues in Designing U.S. Climate Change Policy (June 23, 2008). RFF Discussion Paper No. 08-20. Available at SSRN: https://ssrn.com/abstract=1350027 or http://dx.doi.org/10.2139/ssrn.1350027

Joseph E. Aldy (Contact Author)

Harvard Kennedy School

79 JFK Street
Cambridge, MA 02138
United States
617-496-7213 (Phone)

HOME PAGE: http://www.hks.harvard.edu/about/faculty-staff-directory/joseph-aldy

National Bureau of Economic Research

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Resources for the Future

79 JFK Street
Cambridge, MA 02138
United States
617-496-7213 (Phone)

HOME PAGE: http://www.hks.harvard.edu/about/faculty-staff-directory/joseph-aldy

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

William A. Pizer

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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