Designing a Mandatory Greenhouse Gas Reduction Program for the U.S.

Pew Center for Global Climate Change

May 2003

By Robert Nordhaus and Kyle Danish

The Pew Center asked report authors Robert Nordhaus of Van Ness Feldman, P.C., and George Washington University Law School, and Kyle Danish of Van Ness Feldman to examine options for designing a mandatory U.S. greenhouse gas reduction program. Three options are specifically evaluated: (1) cap-andtrade programs, (2) greenhouse gas taxes, and (3) a “sectoral hybrid” program that combines efficiency standards for automobiles and consumer products with a cap-and-trade program applicable to large sources of greenhouse gases. In addition to identifying design issues unique to each type of program, the authors evaluate the options according to the following criteria: environmental effectiveness, cost-effectiveness, administrative feasibility, distributional equity, and political acceptability.

This report identifies issues that must be addressed in the design of a mandatory, domestic greenhouse gas (GHG) reduction program. Three options are specifically evaluated: (1) cap-and-trade programs, (2) GHG taxes, and (3) a “sectoral hybrid” program that combines efficiency standards for automobiles and consumer products with a cap-and-trade program applicable to large GHG emission sources.

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