Tradable permits as a policy mechanism for greenhouse gas abatement

This paper examines permit trading as an instrument for greenhouse gas emission abatement and suggests that a cap and trade scheme is the lowest-cost option for achieving this goal. The paper examines relevant examples of emission trading within the United States, including the Acid Rain Program contained within the 1990 Clean Air Act, the Regional Greenhouse Gas Initiative, and the Chicago Climate Exchange. I address the circumstances, constraints, and degree of success of such programs in relation to the Kyoto Protocol as well as other possible permit schemes at the national level within the United States. I contrast tradable permits with other forms of environmental abatement policy including command and control regulation and taxation. Finally, I analyze the effect of several variables including population and GDP on emissions growth and draws conclusions on what extent those variables play on shaping a domestic greenhouse gas trading program.