The decision about what to regulate - which emissions sources and which gases - has major implications for the costs of a program. A single, broad-based, economywide program that includes all emissions sources and all major greenhouse gases (GHGs; most notably CO2 but also methane, nitrous oxide, and fluorinated gases) will be the most cost-effective because it will include the most opportunities for emissions reductions, including inexpensive reductions.
A related question is where in the fossil fuel supply chain regulation occurs; although much less important for the overall economic cost, it can have implications for program costs. The most common distinction is between upstream regulation (when fuels are produced or processed) and downstream (at the point of fuel combustion).
Typically upstream regulation will cover a larger portion of emissions at a smaller number of regulated entities, and is therefore assumed to be administratively simpler.
Scope and Point of Regulation for Pricing Policies to Reduce Fossil Fuel CO2 EmissionsWilliam A. PizerAssessing U.S. Climate Policy OptionsIssue Brief #4.
By the Numbers: Greenhouse Gas Emissions and the Fossil-Fuel Supply Chain in the United StatesDaniel S. HallAssessing U.S. Climate Policy OptionsIssue Brief #1.
Key elements andtargets of ClimateChange Bills Introducedin the 111th Congress
Emission Allowance Allocations Under The American Power (Kerry-Lieberman) Act (.xls)