Counting the change: accounting for the fiscal impacts of controlling carbon emissions: hearing before the Committee on the Budget

Original publisher: Washington : U.S. G.P.O. : For sale by the Supt. of Docs., U.S. G.P.O., 2008. LC Number: KF27 .B8 2007v OCLC Number: (OCoLC)212380230 Subject: Carbon dioxide mitigation -- Economic aspects -- United States. Excerpt: ... 11 of such extreme costs provides an economic motivation for additional action to mod-erate the growth of emissions - and, potentially, to reduce emissions to very low lev-els in the longer run. Individuals take actions, such as mitigating risky behavior or buying insurance, to reduce their harm from extreme events. Similarly, societies or governments do and should take actions to avoid catastrophic collective harm. The difficulty for policymakers is determining the appropriate cost to be paid today to 1 reduce what may be a small risk of a potentially catastrophic event in the future.-INCENTIVE BASED APPROACHES TO REDUCING EMISSIONS Any effort to limit CO2 emissions would have two principal effects: It would produce long-term economic benefits by avoiding some future climate-related dam-age, and it would impose immediate economic costs by reducing the use of fossil fuels. Most analyses suggest that a carefully designed program to begin lowering CO2 emissions would produce greater benefits than costs. Employing incentive-based policies to reduce CO2 emissions would be much more cost-effective than using more-restrictive command-and-control approaches ( such as imposing technology standards on electricity generators ). Command-andcontrol ap-proaches rely on policymakers to determine where or how emissions should be cut. Incentive-based policies, by contrast, use the power of markets to identify the least expensive sources of emission reductions. Thus, they can better reflect technological advances, differences between industries or companies in the ability to make low-cost emission reductions, and changes in market conditions. The two main incentive-based approaches to reducing CO2 emissions are to tax such emissions or to es...