Cost Containment under Cap and Trade: A Review of the Literature

Harrison Fell, Eric Moore and Richard D. Morgenstern

International Review of Environmental and Resource Economics, 2011, vol. 5, issue 4, 285-307

Abstract: Cap and trade programs have been a commonly proposed method to regulate emissions of various pollutants. As many countries move forward with plans to regulate CO 2 emissions, concerns over containing the costs of such policies often arise given the relatively large scope of the programs. We review three cost containment mechanisms most commonly employed in existing cap and trade policies and/or discussed in the literature: banking and borrowing, hybrid policies, and emission offsets. For each of these mechanisms we discuss the theoretical basis for the policy, potential unintended consequences and, where applicable, the effectiveness of the policy as it has been used in practice.

Keywords: Cost containment; Cap and trade; Offsets; Hybrid policies; Allowance banking (search for similar items in EconPapers)
JEL-codes: Q52 Q54 Q58 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:now:jirere:101.00000044

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