Lessons Learned from Three Decades of Experience with Cap-and-Trade

Experience can offer some guidance to the conditions under which cap-and-trade approaches are most likely to work well, and when they may face the greatest difficulties.



Nov. 17, 2015


Working Paper

Reading time

1 minute

This essay provides an overview of the major emissions trading programs of the past thirty years on which significant documentation exists, and draws a number of important lessons for future applications of this environmental policy instrument. References to a larger number of other emissions trading programs that have been implemented or proposed are included.

Key findings

  • Cap and trade has proven to be environmentally effective and economically cost-effective relative to traditional command-and-control approaches.
  • Cap-and-trade instruments are now considered for a wide range of environmental problems, ranging from endangered species preservation to global climate change.
  • Cap and trade merits serious consideration when regions, nations, or subnational jurisdictions seek to develop policies to reduce greenhouse gas emissions.
  • Thirty years of experience with cap-and-trade systems with a variety of designs has implications for future applications.


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