Establishing a Regulatory Foundation for Market-Based Greenhouse Gas Programs

Several states in the U.S. have adopted market-based mechanisms to reduce greenhouse gas (GHG) emissions, and others are now considering similar policies, creating the potential for broader GHG trading markets. Guided by several examples of successful market-based programs, there are a number of actions that states can begin immediately to help improve environmental and climate policy and lay the foundation for potential GHG markets. These existing programs have a proven track record of success, both in helping to reach environmental targets and in integrating a GHG price into other systems and decisions, such as electricity markets. This paper discusses key actions that states might consider to start building a foundation for potential GHG markets.