Economists have long argued that cap-and-trade programs are generally preferable to traditional approaches to regulating pollution. Traditional regulatory methods require regulators to identify which emission controls will be used by each facility, sometimes requiring a costly and time-consuming process for program administrators and the regulated industries. Furthermore, they typically do not take into account differences in the cost of controlling pollution across sources, so abatement does not always occur where it is most cost-effective to reduce pollution. Cap-and-trade programs ensure that abatement occurs where pollution is least costly to control and places significant emphasis on the measurement of emissions and not on the actual method of control. These programs also provide incentives for regulated sources to reveal their actual cost of controlling pollution and adopt innovative technologies. The watershed event that raised the popularity of cap-and-trade programs was the adoption and success of the national program to control sulfur dioxide (SO2) from coal-fired power plants in the United States. The SO2 program, which began in 1995, reduced emissions dramatically and at less cost than traditional methods. Although there is a substantial literature on the U.S. SO2 and nitrogen oxide (NOx) cap-and-trade programs, little attention has been paid to a smaller, less publicized program: the Emissions Reduction Market System (ERMS) for volatile organic materials (VOMs) in Chicago, Illinois.
Where are the Sky's Limits? Lessons from Chicago's Cap-and-Trade Program
Journal Article by David Evans, and Joseph Kruger — March 21, 2007View Journal Article
Oregon Could Become Second in World to Implement Economy-Wide Carbon Pricing
This bill advances a model for states to develop carbon cap programs that can be customized to fit the local economy
Decarbonization in Vermont: An RFF Report for the Vermont State Legislature
A new RFF report examines different policies to address greenhouse gas (GHG) emissions in Vermont.
Carbon Pricing in Oregon
Oregon has committed to reducing emissions of greenhouse gases by 75 percent below 1990 levels by 2050. This report, which presents two memoranda sent to the Oregon Climate Policy Office, provides a primer for understanding the choices facing the state.