Assessment of Past and Present Cap and Trade Systems to Guide the Design of Title XII of the United States Clean Air Act: Carbon Dioxide Control

Abstract

With the impacts of climate change, such as sea level rise and more frequent extreme weather events, beginning to come to fruition, many are now looking for ways to prevent further escalation. Reducing carbon dioxide emissions, the greenhouse gas that humankind emits in greatest volume, would be a tremendous step forward in this process. Cap and trade systems have been utilized in the past and present to reduce pollutant emissions in multiple sectors with various degrees of success. This thesis begins with rigorous analysis of the United States’ Acid Rain Program, Mid-Atlantic Regional Greenhouse Gas Initiative, and European Union Emissions Trading System. An understanding of their regulatory frameworks, price volatility, and ultimate outcomes serves as the foundation for the design of a proposed Title XII of the Clean Air Act - a cap and trade system that eliminates carbon dioxide emissions from the United States’ electricity generators by mid-century. The proposed Title XII takes a regionalized approach to accomplish the task of carbon emission reductions, dividing the United States into ten separate allowance markets which effectively creates ten unique cap and trade programs. The program’s first two-year phase, starting in 2023, fixes emissions with the bulk of allowances acquired for free. Its second phase has more aggressive emissions reduction targets that range from 40-54.4% of 2019 emissions over its 12 years. Remaining phases, each nine years in length, feature far less aggressive targets, but all include banked allowance adjustments, a Cost Containment Reserve, and an Emissions Containment Reserve to keep prices of an allowance at an effective level. Auction revenues are only partially reserved for a Carbon Capture Fund and Coal Transition Fund in the program’s second phase to ensure utilities have little additional requirements to meet aside from eliminating carbon dioxide emissions by 2055.