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.
Joe Aldy is a university fellow at RFF and professor of the practice of public policy at Harvard’s Kennedy School. His research focuses on climate change policy, energy policy, and mortality risk evaluation.
William A. Pizer
President and CEO, Resources for the Future
Billy Pizer is President and CEO of Resources for the Future.
Media Highlight — Jun 4, 2024
E&E News: “Tightening Cap and Trade in California Will Help Climate, Group Says”
This story details the findings of a new RFF report in the context of California's evolving cap-and-trade program.
Media Highlight — May 31, 2024
S&P Global: “US Utilities Support Cap-and-Trade Option for Next EPA Gas Rule”
An article about EPA's new rule on natural gas plants pulls a statement that the head of EPA's Office of Air in Radiation made during an RFF Live event.
Media Highlight — Mar 20, 2024
E&E News: “Washington Carbon Price Crashes as Possible Repeal Looms”
RFF Senior Fellow Dallas Burtraw shares his thoughts on the effects of a bill to repeal Washington State‘s carbon market and the market's falling prices.
On the Issues — Nov 10, 2023
On the Issues: Renewable Energy Headwinds, Electric Grid Upgrades, and More
A biweekly newsletter connecting global current events, pressing climate and energy policy news, and economics research from RFF scholars. This week: Renewable Energy Headwinds, Electric Grid Upgrades, and More.
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