A Meaningful U.s. Cap-and-trade System to Address Climate Change

There is growing impetus for a domestic climate policy that can provide meaningful reductions in emissions of CO2 and other greenhouse gases. In this article, I propose and analyze a scientifically sound, economically rational, and politically feasible approach for the United States to reduce its contributions to the increase in atmospheric concentrations of greenhouse gases. The proposal features an upstream, economy-wide CO2 cap-and-trade system that implements a gradual trajectory of emissions reductions over time and includes mechanisms to reduce cost uncertainty. I compare the proposed system with frequently discussed alternatives. In addition, I describe common objections to a cap-and-trade approach to the problem and provide responses to those objections.