Abstract

Although replacing regulatory emissions control policies with market-based instruments has produced significant cost savings, the predominant effect has been to reduce emissions. The savings and emission reductions have fallen somewhat short of their full potential, however, partly because actual designs have deviated from the most economically efficient designs (e.g., because programs are not fully comprehensive). Market-based policies have also promoted clean technology investments (although gains are not always as large as expected). Carbon leakage effects to date have been relatively modest.