Using emissions trading to regulate US greenhouse gas emissions: An overview of policy design and implementation issues

In Kyoto in 1997, the U.S. government agreed that between 2008 and 2012 it would limit average annual emissions of greenhouse gases (GHGs) to seven percent below 1990 levels. As participants in the climate policy debate consider various means by which limits on U.S. GHG emissions might be undertaken in the wake of the Kyoto agreement, there is considerable interest but also some confusion about how a GHG trading program could be organized and operated in practice. In this paper, we address several aspects of policy design for a U.S. system, such as who and what is covered by regulation, the organization of the trading system, how carbon permits are allocated, and how a system could be initiated and changed over time.