Designing Cap and Trade to Account for 'Imperfect' Offsets

Duke Environmental Economics Working Paper No. EE10-03

28 Pages Posted: 13 Sep 2011

See all articles by Brian C. Murray

Brian C. Murray

Duke University

Aaron Jenkins

Duke University - Nicholas Institute for Environmental Policy Solutions

Date Written: September 1, 2010

Abstract

The use of offsets can potentially improve a cap-and-trade system by lowering the overall cost of compliance, encourage mitigation from outside of the cap, and function as a bridge strategy, giving the regulated sectors time to innovate new low-carbon technologies and business plans. But offset provisions can be imperfect, and decision makers must appreciate the implications of these flaws and design the national offset program accordingly. This paper discusses three policy options for addressing offset integrity issues that can cause effective aggregate abatement to fall below the optimum level set by a compliance cap, and assesses the efficiency and welfare implications – for offset buyers and suppliers – of these policy options.

Suggested Citation

Murray, Brian C. and Jenkins, Aaron, Designing Cap and Trade to Account for 'Imperfect' Offsets (September 1, 2010). Duke Environmental Economics Working Paper No. EE10-03. Available at SSRN: https://ssrn.com/abstract=1926469 or http://dx.doi.org/10.2139/ssrn.1926469

Brian C. Murray (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Aaron Jenkins

Duke University - Nicholas Institute for Environmental Policy Solutions ( email )

Box 90328
Durham, NC 27708-0328
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
16
Abstract Views
279
PlumX Metrics