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.
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.
- 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.
Richard Schmalensee is a chair emeritus of the RFF Board of Directors and an expert in energy and environmental policy.
Media Highlight — Apr 26, 2022
E&E News: "Cap and Trade Gets a Big Win in Pennsylvania. Will It Last?"
Senior Fellow Karen Palmer remarks on Pennsylvania's recent move to join the Regional Greenhouse Gas Initiative, an interstate cap-and-trade program.
Media Highlight — Feb 16, 2022
KNX in Depth: California's Cap-and-Trade Policy
Senior Fellow Dallas Burtraw shares his thoughts on California's cap-and-trade policies with KNX News, a California radio station.