This afternoon, the House Energy and Commerce Committee released a white paper “Getting the Most Greenhouse Gas Reductions for our Money.” Premised on the Committee’s goal of achieving “the necessary greenhouse gas reductions (60 to 80 percent by 2050) for the least cost,” the paper discusses research on the future costs of inaction, summarizes the findings of the McKinsey Report on low cost measures to reduce emissions, and uses the U.S. sulfur dioxide trading program under the Clean Air Act to illustrate the efficiencies that could be realized through capping and trading emissions allowances.

The paper recognizes that the benefits of a cap-and-trade system are contingent on the success of the market at managing impacts to the economy and discusses six mechanisms that could be used to avoid unnecessarily high costs: (1) allowance banking; (2) offsets and international trading; (3) firm-level borrowing from the future; (4) multi-year compliance periods; (5) cost containment mechanisms that could release additional allowances into the market if needed (e.g., safety valve, circuit breaker, independent agency, and strategic reserve); and (6) a floor for allowance prices, to ensure a minimum price for technology developers. The paper concludes with brief descriptions of possible complementary measures (such as energy efficiency), the distribution of allowances among regulated entities, and the relative capacities of market players.

The white paper is one in a series of papers on Climate Change Legislation Design released by Rep. John D. Dingell (D-MI) and Rep. Rick Boucher (D-VA). Earlier papers include “Competitiveness Concerns/Engaging Developing Countries” and “Appropriate Roles for Different Levels of Government.”

For further information about this topic, please contact Akin Gump.