Economic Costs of a Market-based Climate Policy

Effort to develop a mandatory climate policy is accelerating and it seems likely that a national market-based strategy for dealing with climate change is on the near term horizon. Key provisions are likely to include a cap on selected greenhouse gas (GHG) emissions, an institutional framework for creating a nationwide emissions permit market, a welcoming integration of abatement opportunities from external domestic and international sources, and recognition of a broad range of features designed to soften economic impacts or promote economic efficiency. Prompted by a national sense of urgency, businesses, states and regions also are actively engaged in designing and implementing their own variations on these themes. Together, it is clear that there is growing support for a market-based complement to the technology orientation that characterizes current U.S. policy.