As part of the project “The Coming US Carbon Market: Planning for Ex Post Analysis,” funded by the Alfred P. Sloan Foundation, experts at Resources for the Future have developed several background memos (“backgrounders”) on cap-and-trade and carbon tax systems to highlight current research, available data, and potential research limitations, such as data gaps or modeling constraints. Many of the findings, strengths, and limitations could also apply to evaluating other potential efforts to reduce carbon dioxide emissions, such as tradable performance standards under the Clean Air Act.
In addition to informing policy discussions, the backgrounders provide informative overviews of each topic to anyone interested in better understanding climate policy assessments, including researchers, students, and experts in government, academia, nongovernmental organizations, and industry.
Below are brief summaries of the backgrounders.
- “Competitiveness Impacts of Climate Policy” reviews studies to estimate the economic impacts of the Kyoto Protocol, the European Union Emission Trading System (EU ETS), and US climate policy proposals. Research in this area typically considers national and regional impacts of climate policy on welfare, gross domestic product, aggregate production, and trade balance. Studies looking at subnational impacts often focus on energy-intensive and trade-exposed industries and consider impacts on profitability and production.
- “Climate Policy, International Trade, and Emissions Leakage” reviews studies that estimate the environmental efficacy of the Kyoto Protocol, the EU ETS, and US climate policy proposals and current systems, including California’s cap-and-trade program and the Regional Greenhouse Gas Initiative. The backgrounder also considers border tax adjustments, a mechanism that may significantly reduce emissions leakage.
- “Kyoto Flexibility Mechanisms: Clean Development Mechanism and Joint Implementation” reviews research on carbon offsets from the two flexibility mechanisms authorized by the Kyoto Protocol.
- “Land Use, Land-Use Change, and Forestry Offsets” reviews research on land-based carbon offsets not authorized by the Kyoto Protocol, including the potential supply and cost of offsets and barriers to further acceptance of offsets, such as concerns regarding measurement, additionality, leakage, and permanence.
- “The European Union Emissions Trading System” describes the history, implementation, and performance of the EU ETS, the world’s largest cap-and-trade system. While a summary of available data on EU ETS is included, more detailed assessments of the performance of the EU ETS are in other backgrounders.
- “The US Environmental Protection Agency’s Acid Rain Program” introduces the world’s first successful cap-and-trade program, the Acid Rain Program. In addition to describing program implementation and effectiveness, the backgrounder also describes program monitoring systems and available data.