Balancing Cost and Emissions Certainty: An Allowance Reserve for Cap-and-Trade / Brian C. Murray, Richard G. Newell, William A. Pizer.

Format:

Book

Author/Creator:

Murray, Brian C.

Contributor:

National Bureau of Economic Research.

Newell, Richard G.

Pizer, William A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w14258.

NBER working paper series no. w14258

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Balancing Cost and Emissions Certainty

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

On efficiency grounds, the economics community has to date tended to emphasize price-based policies to address climate change -- such as taxes or a "safety-valve" price ceiling for cap-and-trade -- while environmental advocates have sought a more clear quantitative limit on emissions. This paper presents a simple modification to the idea of a safety valve: a quantitative limit that we call the allowance reserve. Importantly, this idea may bridge the gap between competing interests and potentially improve efficiency relative to tax or other price-based policies. The last point highlights the deficiencies in several previous studies of price and quantity controls for climate change that do not adequately capture the dynamic opportunities within a cap-and-trade system for allowance banking, borrowing, and intertemporal arbitrage in response to unfolding information.

Notes:

Print version record

August 2008.