Market-Based Approaches to CO2 Emissions Reductions

Numerous proposals have surfaced promoting policies to limit U.S. emissions of gases like Carbon Dioxide (CO2), a primary contributor to climate change. One such proposal is Senate Bill 2191, the Lieberman-Warner Climate Security Act, which was introduced to the 110th Congress on October 18, 2007. Like many proposals to control greenhouse gas emissions, S. 2191 embraces a market-based approach to achieving reductions. It includes provisions for a carbon emissions trading program and also introduces incentives for carbon sequestration in agriculture and forestry. In the recent flurry of political advocacy and activity, a fair amount of ambiguity and confusion have arisen concerning what carbon tax and carbon trading policy options might entail, and how their impacts might differ. Here we briefly describe some of the basic features of these policy options. We return to the issue of how current policy options might relate to agriculture in the final section.