How to do Cap and Trade


In a better world, we'd be past the debate over whether to enact legislation to curb America's carbon emissions and we could all spend our time glorying in things like Peter Orszag's recommendations on how to structure and implement a cap and trade scheme so as to maximize the room for economic growth and avoid doing anything that's unduly regressive.

He says the two most important points are (a) that we need to allow for some banking and borrowing of emissions permits, so that reductions can happen at the most economically opportune times rather than on an arbitrary schedule, and (b) that we need to auction the permits so as to generate revenue that can offset some of the problems caused by the imposition of the cap.

Photo by Flickr user futureatlas used under a Creative Commons license