File

Gonzaga Debate Institute 2008 1
Scholars Permits Aff
Cap and Trade Aff – Version 1

Cap and Trade Aff – Version 1 .......................................................................................................................................1
File Notes .......................................................................................................................................................................4
***Inherency...................................................................................................................................................................5
Inherency – No Cap and Trade/Federal Emissions Limits.............................................................................................6
Inherency – Federal Climate Policy Incoherent..............................................................................................................7
Inherency – Lack of Climate Action – General .............................................................................................................8
***Oil Dependence.........................................................................................................................................................9
Cap and Trade Reduces Oil Demand ...........................................................................................................................10
Cap and Trade Solves Wars from Warming and Peak Oil ............................................................................................11
Cap and Trade Solves Wars from Warming and Peak Oil.............................................................................................12
***Climate Advantage..................................................................................................................................................13
Yes Warming.................................................................................................................................................................14
Yes Warming/Rate Increasing .....................................................................................................................................15
U.S. Key to Warming ...................................................................................................................................................16
Reducing Emissions Now Key.....................................................................................................................................17
Cap and Trade Solves Climate Change.........................................................................................................................18
Cap and Trade Solves Climate Change – Economy-Wide Key ...................................................................................19
Cap and Trade Solves Climate Change – Innovation/Renewables...............................................................................20
Cap and Trade Solves Climate Change – Spillover......................................................................................................21
Cap and Trade Now Solves Wars from Warming.........................................................................................................22
AT: Warming Good.......................................................................................................................................................23
***Trade Wars Advantage............................................................................................................................................24
Trade Wars Advantage – 1AC ......................................................................................................................................25
Trade Wars Advantage – Internal Link ........................................................................................................................28
***Economy.................................................................................................................................................................29
Cap and Trade Good – Economy .................................................................................................................................30
Cap and Trade Popular with Businesses ......................................................................................................................31
Cap Phase-In Solves Economy Links...........................................................................................................................32
AT: Cap and Trade Kills GDP ......................................................................................................................................33
AT: Economy Links – Delay Makes it Worse ..............................................................................................................34
AT: Cap and Trade Hurts Competitiveness ..................................................................................................................35
***Solvency..................................................................................................................................................................36
Cap and Trade Solves – General ..................................................................................................................................37
Cap and Trade Solves – Empirics ................................................................................................................................38
Cap and Trade Works – Empirics – Acid Rain .............................................................................................................39
Cap and Trade Solves – Economic Growth, Warming, Oil..........................................................................................40
AT: Alt Causes/Cap and Trade Not Enough .................................................................................................................41
AT: Cap and Trade Diverts Attention/Masks Problems................................................................................................42
AT: California Proves Command Control Better..........................................................................................................43
AT: Clean Air Act proves Emissions trading doesn’t work...........................................................................................44
AT: Cap and Trade Doesn’t Solve Transportation Sector ............................................................................................45
AT: Entry Barriers/Bad for Competition ......................................................................................................................46
***Mechanisms............................................................................................................................................................47
FYI: Plan Ideas .............................................................................................................................................................48
FYI: Upstream vs. Downstream....................................................................................................................................49
FYI: Explanation of Upstream .....................................................................................................................................50
FYI: Who Would/Should Get Permits...........................................................................................................................51
Upstream Better than Downstream – Coverage ...........................................................................................................52
Upstream Key – Coverage – With Impact ...................................................................................................................53
Upstream Better than Downstream – Admin ...............................................................................................................54
Upstream Key to Solve Climate ...................................................................................................................................55
Upstream Key to Feasibility.........................................................................................................................................56
Downstream Fails – Monitoring/Efficiency .................................................................................................................57
AT: Upstream Fails/Downstream Better.......................................................................................................................58
No Cost Difference for Consumers between Up and Downstream..............................................................................59
*Auctioning...................................................................................................................................................................60
Auctions Good – Key to Economy ..............................................................................................................................61
Auctioning Good – Key to Economy ...........................................................................................................................62
Auctioning Good – Lowers Energy Prices....................................................................................................................63
Auctioning Good- Taxes/Economy...............................................................................................................................64
Auctioning Good- Innovation.......................................................................................................................................65
Auctions Good – Revenue ...........................................................................................................................................66
Auction Better than Giveaways – Empirics .................................................................................................................67
100% Auction Good .....................................................................................................................................................68
100% Auction Good......................................................................................................................................................69
A2: Auctioning Bad – Costs .........................................................................................................................................70
A2: Auctioning Bad- Monopoly...................................................................................................................................71
Grandfathering Bad/Auctioning Good..........................................................................................................................72
A2: Grandfathering Good- Economy............................................................................................................................73
A2: Grandfathering Good/Auctioning Bad- Economy.................................................................................................74
A2: Grandfathering Decreases Energy Prices...............................................................................................................75
***AT: Disads...............................................................................................................................................................76
AT: Elections ................................................................................................................................................................77
AT: Natural Gas DA .....................................................................................................................................................78
AT: Hotspots of Pollution .............................................................................................................................................79
***AT: Counterplans.....................................................................................................................................................80
*AT: States....................................................................................................................................................................81
States Don’t Solve – Balkanization ..............................................................................................................................82
States Don’t Solve – Long Term Budget Problems .....................................................................................................83
States Don’t Solve – International Harmonization ......................................................................................................84
State Cap and Trade Gets Struck Down – General ......................................................................................................85
State Cap and Trade Gets Struck Down – Supremacy Clause .....................................................................................86
State Cap and Trade Gets Struck Down – Foreign Affairs ..........................................................................................87
State Cap and Trade Gets Struck Down – Commerce Clause .....................................................................................88
Federal Cap and Trade Supercedes States ....................................................................................................................89
Federal Government Will Supercede State Efforts ......................................................................................................90
*AT: Carbon Tax...........................................................................................................................................................91
Cap and Trade Better than Carbon Tax – Climate Change ..........................................................................................92
Carbon Tax Bad - Economy .........................................................................................................................................93
Carbon Tax Bad - Competitiveness ..............................................................................................................................94
Cap and Trade Solves Net Benefits to Carbon Tax ......................................................................................................95
No Politics Link Differential Between Cap-and-Trade and Tax...................................................................................96
*AT: Misc CPs..............................................................................................................................................................97
Command and Control Fails – Climate Change/Costs ................................................................................................98
Cap Exemptions Bad – Innovation/Climate Change ..................................................................................................99
Cap Exemptions Fail – Economy ...............................................................................................................................100
Cap Exemptions Fail – Costs/Climate Change ..........................................................................................................101
Opt-In Programs Bad – Climate Change....................................................................................................................102
Voluntary Action Fails – Climate Change ..................................................................................................................103
Safety Valves Don’t Solve – Climate Change ............................................................................................................104
Safety Valves Bad – Undermine International Linkage .............................................................................................105
Banking Emissions Credits Bad – Climate Change ...................................................................................................106
Efficiency/Tech Standards Fail – Climate Change ....................................................................................................107
Air Quality Regulations Don’t Solve – Climate Change ...........................................................................................108
EPA Regulations of Auto Emissions Don’t Solve – Climate .....................................................................................109
***AT: Ks....................................................................................................................................................................110
Framework Impact – Small Differences in Climate Policy Key.................................................................................111
AT: Commodification K .............................................................................................................................................112
AT: Market/Neolib K ..................................................................................................................................................113
***Topicality...............................................................................................................................................................114
Cap and Trade Distinct from Command and Control.................................................................................................115
Cap and Trade is an Incentive ....................................................................................................................................116
Cap and Trade is an Incentive.....................................................................................................................................117
AT: Effects-T...............................................................................................................................................................118
AT: Extra-T..................................................................................................................................................................119
File Notes
The main advantage to this aff is warming – since the warming file is being done
separately, the only warming cards included here are the ones we came across in the course
of permits research. In order to read this aff (at least in this iteration of the file), you need
to construct your own warming advantage using the warming file. It’s also advisable to
construct your own peak oil advantage using the oil files.
This file is designed mostly to let you have mechanism debates. You should write your plan
to establish an upstream, auctioned system of tradable carbon permits requiring a
substantial reduction of greenhouse gas emissions.
***Inherency
Inherency – No Cap and Trade/Federal Emissions Limits

( ) The federal government has rejected a cap-and-trade approach to carbon emissions,
creating a disastrous lack of federal leadership on climate change
Randall S. Abate, Legal Writing Faculty, Rutgers School of Law-Camden, Spring 2006, Cornell Journal of Law
and Public Policy, 15 Cornell J. L. & Pub. Pol'y 369
In 2001, the Bush administration rejected the Kyoto Protocol. n28 Worse still, although there has been
a flurry of mandatory federal legislative [*374] proposals addressing climate change, n29 only
voluntary climate change programs have been enacted at the federal level as of this writing.
The federal Clean Air Act n30 lacks a mechanism by which to regulate GHG emissions. The principal vehicle
for a possible federal GHG emission reduction program is the Clear Skies Act. n31 The Clear Skies
legislation was introduced in both Houses of Congress in July 2002, and reintroduced in February 2003 as a
proposed amendment to the Clean Air Act. n32 On January 24, 2005, Senators Inhofe (R-Okla.) and
Voinovich (R-Ohio) introduced their version of the Clear Skies Act. n33
The Clear Skies legislation proposed a cap-and-trade regulatory program, n34 which sets new targets
for GHG emission reductions. n35 The pollutants it targeted included sulfur dioxide, mercury, and nitrogen
oxides. n36 It did not include, however, a single measure to reduce, or even limit carbon dioxide
emissions - the chief contributor to global warming. n37 In addition, the legislation would phase out, over the next
[*375] decade, the New Source Review n38 permit and enforcement program for power plants. n39
On March 9, 2005, the Environment and Public Works Committee deadlocked, 9-9, on whether to put the Clear Skies Act to the entire
Senate. n40 Chairman of the Committee, James Inhofe (R-Okla.), reported that approximately seven issues divided the Committee,
including whether there should be carbon dioxide emission limitations. n41 As of this writing, the Clear Skies initiative remains tied up
in Committee. n42
In January 2003, Senators Joseph Lieberman (D-Conn.) and John McCain (R-Ariz.) introduced the Climate Stewardship Act of 2003.
The Act would cap GHG emissions at their 2000 levels after 2010. n43 The bill would also establish a market-based emissions credit-
trading system to reduce GHG emissions from power plants, refineries, and other commercial entities. n44 In October 2003, after
modifications, the measure was defeated in the Senate by a 55-43 vote. n45
On June 22, 2005, the Senate, by a 60-38 vote, defeated a proposed amendment to the Climate Stewardship Act that represented a
weaker version of the Kyoto Protocol mandates. n46 Citing costs, the Bush administration had urged the Senate
against placing restrictions on emissions. n47 Instead, the Senate, by a 66-29 vote, approved an amendment that merely
[*376] created tax incentives and loan guarantees to encourage polluters to reduce emissions. n48
In 2005, three additional measures addressing climate change were introduced in the Senate. The first was a bill introduced by Senators
James Jeffords (D-Vt.), Joseph Lieberman (D-Conn.), and Susan Collins (R-Maine) to retain New Source Review and to mandate
tougher emission reduction standards. n49 This bipartisan legislation would also establish a federal cap on carbon dioxide emissions.
n50 If implemented, this legislation would be a good step toward an appropriate mandatory federal climate change program.
The second was a bipartisan resolution, introduced by Senator Dianne Feinstein (D-Calif.), calling on the United States to participate in
international negotiations pertaining to GHG emission reductions. n51 Finally, in February 2005, Senators Susan Collins (R-Maine) and
Maria Cantwell (D-Wash.) introduced legislation to increase federal funding for abrupt climate change research, authorizing $ 10 million
per year for the next six years. n52
While the federal government continues to debate whether and to what extent a mandatory federal
climate change program is necessary, these federal legislative initiatives are only a small step in the
right direction. Several States, regions, and cities have already implemented aggressive and comprehensive
climate change regulation programs. Moreover, the private sector has adopted voluntary programs. Parts II
and III of this Article evaluate these programs.
Cap and trade is constantly rejected despite being the most cost-effective way of regulating
CO2 emissions
Yvonne Gross, J.D., Thomas Jefferson School of Law, Fall 2005, “Kyoto, Congress, or Bust: The Constitutional
Invalidity of State CO2 Cap and Trade Programs,” Thomas Jefferson Law Review, 28 T. Jefferson L. Rev. 205, p.
215
Cap-and-trade programs can be a useful tool for regulating CO2 emissions because they strike a balance
between preventive approaches to global warming and the economic challenges to emitters of CO2.
Accordingly, cap-and-trade programs are an economically efficient way to allocate the burdens of CO2
regulation if implemented across multiple sectors and on a national basis. However, they still represent
a mandatory approach to CO2 regulation that has been consistently rejected by both past and current
presidential administrations.47
Inherency – Federal Climate Policy Incoherent

( ) Lack of a coherent federal climate policy is causing fragmented state efforts that
undermine business confidence and tank U.S. leadership on climate internationally
Albert N. Stavins, Professor of Business and Government at Harvard and Director of the Harvard Environmental
Economics Program, October 2007, “A U.S. Cap and Trade System to Address Global Climate Change,” online:
http://www.brookings.edu/~/media/Files/rc/papers/2007/10climate_stavins/10_climate_stavins.pdf, accessed June
20, 2008
In the absence of a responsive federal policy, regions, states, and even cities have moved forward with
their own proposals to reduce emissions of CO2 and other greenhouse gases. Ten northeastern states, for
example, have developed a cap-and-trade program under their Regional Greenhouse Gas Initiative (RGGI),
and California’s Assembly Bill 32 may do likewise for the nation’s largest state. Partly in response to fears
of a fractured set of regional policies, an increasing number of large corporations— sometimes acting
individually, other times in coalition with environmental advocacy groups— have announced their support
for serious national action.2 Building on this initiative is the April 2007 U.S. Supreme Court decision
that the administration has the legislative authority to regulate CO2 emissions,3 as well as ongoing
demands from European allies and other nations that the United States reestablish its international
credibility in this realm by enacting a meaningful domestic climate policy. Indeed, in June 2005 the
Senate balanced its distinctly negative view of the Kyoto Protocol with an aggressive sense-of-the-Senate
resolution, adopted by unanimous consent, regarding domestic climate policy.4
Inherency – Lack of Climate Action – General

U.S. government has failed to act despite public interest
Reuven S. Avi-Yonah, the Irwin I. Cohn Professor of Law and the Director of the International Tax LLM Program
at the University of Michigan Law School, and David M. Uhlmann, the Jeffrey F. Liss Professor from Practice
and the Director of the Environmental Law and Policy Program at the University of Michigan Law School, March
18, 2008, “Combating Global Climate Change: Why a Carbon Tax is a Better Response to Global Warming than
Cap and Trade,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1109167, accessed June 23, 2008
In addition to continuing to stake out a firm stance that developing nations must commit to greenhouse
gas reductions before the United States will make such a commitment, President Bush also has stated
that we should look to economic growth to “provide[] the resources for investment in clean
technologies.”66 Some commentators have described this position as stating that “growth is the solution
and not the problem.”67 This is a convenient position for polluting industries, since it allows them to
continue business as usual without regard to the damages associated with greenhouse gas emissions.68
In this sense, President Bush’s position is not all that different from the 95-0 Senate Resolution in 1997,
which also called for opposing any international agreement that “would result in serious harm to the
economy of the United States.”69 The United States has maintained relatively constant opposition to any
measures that might threaten the United States economy. Europe, on the other hand, has taken a much
different view of climate change. Rather than seeing climate change regulation as a hindrance, many
European industries have actually welcomed regulation as a means to provide certainty to the market.70
Although many American industries also have shown that they are not opposed to lowering
emissions,71 the federal government so far has done practically nothing to address climate change.
Even when the United States does pass legislation, it often falls far short of European efforts. For
instance, recent legislation in the United States now requires major automakers to meet an increased standard
of 35 miles per gallon on average by 2020,72 whereas Europe already requires an average of 40 miles per
gallon.73
The United States has no system of regulating CO2 emissions now

209-210
Generally, the theory of global warming predicts that increased GHGs in the atmosphere will cause
measurable increases in the Earth’s average temperature, resulting in worldwide climate change.14
Solar radiation is the main means by which the Earth is warmed.15 A portion of this energy is trapped in the
atmosphere by GHGs such as water vapor or CO2 instead of being re-radiated back toward the sun.16 The
result is warming of the Earth’s surface and lower atmosphere, increasing the Earth’s average
temperature.17 Hence, the theory of global warming anticipates that increased amounts of GHGs in the
atmosphere, by trapping more solar energy, will cause an increase in the Earth’s average temperature.18 As
global temperatures rise, the theory predicts potentially adverse effects on the Earth, such as significant
changes in the climate, increases in sea levels, and other potentially unseen changes.19 While there is
debate within the scientific community about the nexus between climate change and GHG emissions, ample
evidence demonstrates that concentrations of GHGs in the atmosphere are increasing.20 There is specific
national legislation employing cap-and-trade programs in place to regulate emissions of sulfur dioxide
and nitrogen oxide and dioxide; however, GHGs such as CO2 remain unregulated at the federal level
as the United States takes steps to better understand climate change. 21
***Oil Dependence
Cap and Trade Reduces Oil Demand

( ) A cap and trade program reduces oil demand substantially
20, 2008
As indicated above, the cap-and-trade system has the effect of reducing demand for fossil fuels relative
to BAU and hence reducing fossil fuel prices relative to what those prices would be in the absence of policy.
There is an important distinction, however, between the price of fuels themselves (Table 6) and the cost
of using those fuels. Table 8 reports estimates of the added cost for each of the major fuels, including crude
oil, gasoline, heating oil, wellhead natural gas, residential natural gas, and utility coal, at sample allowance
prices of $25, $50, and $100 per ton of CO2. These added costs of allowances to fuel users (which do not
include the adjustment for the effects of the cap-and-trade policies on producer prices from Table 6) are
compared with the average price of the respective fuels over a recent period. Not surprisingly, the percentage
impacts on costs for users of crude oil are greater than for users of derived products, such as gasoline and
heating oil, because the costs of these products include capital and labor for refining, in addition to the
cost of the crude oil itself. Likewise, the percentage impact on the cost of wellhead natural gas is much
greater than that on residential natural gas, which includes costs of transportation and distribution. Of course,
by far the greatest impacts are on users of coal. In the case of gasoline, natural gas, and electricity, anticipated
price impacts are actually relatively modest when compared with historical changes in prices since 1990.
Also, the anticipated price increases take place much more gradually than did recent spikes in energy prices
(Aldy 2007, 15).
Cap and Trade Solves Wars from Warming and Peak Oil
( ) Runaway climate change will cause environmental destruction and armed conflict
across the globe, while peaking oil production will cause wars and collapse the economy –
implementing a cap and trade program now is critical to avert catastrophic climate change
John Podesta, President and CEO of the Center for American Progress, January 23, 2008, “Cap, Auction, and
Trade: Allowance Auctions and Revenue Recycling Under Carbon Cap-and-Trade,” online:
http://www.americanprogress.org/issues/2008/01/podesta_testimony.html, accessed June 23, 2008
Global warming is one of the greatest challenges our world faces, and as our understanding of its
implications increases, the case for dramatic, immediate action is only made stronger. Just last week, for
instance, we learned a new, startling fact: The western Antarctic ice sheet is melting at a faster rate than
anticipated by scientific models. This news was particularly disturbing because sea level rise may be
well above the “expected” A1B emission scenario projected in the Intergovernmental Panel on Climate
Change’s Fourth Assessment Report which had already foreseen a sea level rise during the next 30 years that
would have severe global consequences. Perhaps the best we can hope for and certainly the least we ought
to plan for is a climate that will cause severe damage to coastal cities, trading centers, and ecosystems
around the world. We have to come to grips with a climate that will force highly destabilizing human
migration in some of the most politically fragile regions of the world. This is a climate that will put Lagos
at risk by 2015 and will pose enormous challenges for Nigeria and the entire West African region, not to
mention the impact it would have on international oil supplies. We face a climate that will inflict severe
damage on the coastal wetlands of Bangladesh and its groundwater supplies, thus driving more people
inland and fomenting instability as the resettled population would have to compete for scarce resources
with the established residents. Others would migrate abroad, creating heightened political tension not
only in South Asia, but Europe and Southeast Asia as well. Increasing water scarcity due to climate change
will also contribute to instability throughout the world. Although we are not likely to see “water wars” per
se, countries will more aggressively pursue the kinds of technological and political solutions that
currently enable them to exist in regions that are stretched past their water limits. This is likely to be
the case in the Middle East where water shortages will coincide will a population boom. And this, as I
mentioned, was before we learned that the rate at which the western Antarctic ice sheet is melting means that
the sea level rise this century may be measured not in inches, not even in feet, but in meters. Clearly, global
warming presents the United States with multiple foreign policy and economic challenges, and not just from
our deepening dependence on oil. Worldwide, we are already beginning to feel some of the consequences
of climate change—ranging from more intense storms to droughts to sea level rise to food shortages.
And as economies continue to grow, countries will become more like the United States—meaning big-
time polluters—unless we change the trajectory we are currently on. Global warming greatly
complicates the challenge of restoring economic growth and shared prosperity. Here in the United
States, Americans are already burdened by near record oil prices and high gasoline and electricity bills.
This is one of the consequences of the Bush administration’s refusal to adopt a clean energy strategy
and solutions. And, last-ditch efforts, such as what we are seeing from the Bush administration with the
upcoming Major Economies Meeting, will get us no closer to solving global warming than a few meetings at
the end of the administration will bring about substantial gains toward peace in the Middle East. The
challenge we face now is nothing short of the conversion of an economy sustained by high-carbon
energy—putting both our national security and the health of our planet at serious risk—to one based
on low-carbon, sustainable sources of energy. The scale of this undertaking is immense and its potential
enormous. Our traditional understanding of energy security has been largely limited to assuring adequate
supplies of energy to fuel our economy. That will remain a necessary concern, of course, but not a sufficient
one. Going forward our leaders will have to act on an understanding of energy security that turns not just on
the supply but on the carbon content of the energy we use. Otherwise, we will consign ourselves long-term to
the mercy of international markets and an increasingly variable climate. We must act now and act boldly to
put ourselves on a sustainable footing, in the interest of our national, economic, environmental, and energy
security. Simply put, energy will rapidly transform the world for good or ill. The question for the United
States is whether we will participate as a leader in the global energy revolution. The scale of the change we
need is daunting but achievable. We must create a virtuous circle of rising economic fortunes for a growing
global middle class. This must include an energy strategy comprising
CONTINUED – NO TEXT REMOVED…
Cap and Trade Solves Wars from Warming and Peak Oil
PODESTA CONTINUED – NO TEXT REMOVED…
complementary policies that reduce our nation’s carbon footprint, revolutionize energy production and
consumption, lower costs for consumers over time, create new green-collar jobs, and spur innovation and
leadership in the global low-carbon technology marketplace. The urgency of this issue demands a president
willing to make the low-carbon energy challenge a top priority in the White House—a centerpiece not only
of his or her energy policy but also of his or her economic program—to produce broad-based growth and
sustain American economic leadership in the 21st century. This task is so encompassing it will demand that
the incoming president in 2009 reorganize the mission and responsibility of all relevant government agencies
—economic, national security, and environmental. As part of this reorganization, the incoming president
should create a new National Energy Council in the White House led by a National Energy Advisor whose
missions will be the energy transformation of our economy and the promotion of these same steps abroad.
Thus, it is clear that energy policy is economic policy: In order to reverse the economic downturn we are
currently facing and to capture the opportunities provided by a low-carbon energy transformation, we must
put energy at the center of our nation’s economic growth. It is clear that energy policy is economic policy: in
order to reverse the economic downturn we are currently facing and to capture the opportunities provided by
a low-carbon energy transformation, we must put energy at the center of our nation’s economic
transformation and economic growth. The U.S. economy is currently dependent on a few high-carbon,
increasingly expensive energy sources like oil. Fundamentally changing how we produce and consume
energy, investing in low-carbon innovation, and transforming our economy to a low-carbon model are key to
promoting economic mobility, growth, job creation, and re-gaining technological leadership in the global
innovation marketplace. The U.S. Congress obviously realizes the importance of energy policy to the U.S.
economy—last year’s passage of the Energy Independence and Security Act is a demonstration of this—and I
congratulate you for your leadership on this achievement. But we must do more, both to reduce our national
greenhouse gas emissions and to jumpstart the technological innovation and investment needed to get us on
the right track, not only to stimulate and grow the economy but also to avoid the worst effects of global
warming. The longer we wait to act, the costs to our productivity growth, our national security, and our
environment will only continue to skyrocket. The Center for American Progress recently released a report,
entitled “Capturing the Energy Opportunity: Creating a Low-Carbon Economy,” which outlines our strategy
for transforming our economy from a high-carbon to a low-carbon model. In this report, we propose 10 steps
that the next administration can take to transform the economy from a high- to low-carbon model and capture
the opportunities provided by this transformation. I appreciate the opportunity to be with you today to discuss
the design of a national cap-and-trade program for global warming emissions which must be a
fundamental part of our energy and economic policy. CAP recommends an energy strategy that employs a
cap- and-trade system with a 100 percent auction of carbon permits and a suite of public investment policies
funded by the auction revenue. Any national cap-and-trade system should be designed to achieve a level
of reductions that will limit the temperature increase to 3.6°F (2°C) above pre-industrial levels, the
level at which scientists believe we have at least a strong likelihood of avoiding the worst impacts of
catastrophic climate change.
***Climate Advantage
Yes Warming
( ) Predictions and models of global climate change have been proven accurate – warming
is indisputable and its impact will only magnify
20, 2008
The basic story has been explained many times, but it merits repeating. Two trace constituents of the
atmosphere, carbon dioxide (CO2) and water vapor, create a thermal blanket for the planet much as glass on
a greenhouse traps the sun’s energy within. It is a good thing, too: without greenhouse warming, the earth
would be far too cold to be livable. But the balance between too much and too little greenhouse effect is
remarkably delicate. Massive quantities of CO2 are produced from the combustion of fossil fuels—coal,
petroleum, and natural gas—and deforestation. Meanwhile the direct warming effects of CO2 and other
greenhouse gases—methane, nitrous oxide, and halocarbons—are indirectly amplified because the
warming increases the evaporation of water, raising atmospheric water vapor concentrations
(Intergovernmental Panel on Climate Change 2007a).
Average global surface temperatures have risen by about 1.25 degrees Fahrenheit over the past 150
years, with most of the increase occurring since 1970. This fits the predictions of modern computer
models of climate change that also take account of increases in atmospheric dust (dust cools the earth by
reflecting sunlight) and variations in the sun’s energy output. Changes in temperatures in the middle of
continents and at high latitudes have been two to four times greater than the average global change—also as
predicted.
Warmer days and nights (which would surely be welcome in some places) are only part of the story. The
most important consequences of greenhouse gas concentrations are likely to be changes in patterns of
precipitation and runoff, the melting of glaciers and sea ice, increases in sea levels, and changes in
storm frequency and intensity (Intergovernmental Panel on Climate Change 2007b). That is why it is
important to view the problem as global climate change rather than global warming alone. But moving
from predictions of average global temperature change to predictions of regional climate impacts is difficult.
The best computer models cannot yet produce reliable estimates of these impacts. What is obvious, however,
is that emissions in one country affect the climate in every other. Hence the fundamental logic of a global
pact on emissions, such as the one hammered out in Kyoto, Japan, in December 1997.
Yes Warming/Rate Increasing

( ) Overwhelming scientific evidence concludes global warming is real – in particular, the
RATE of warming is rapidly increasing
The scientific evidence that global warming is occurring is overwhelming. In its synthesis report released
in November 2007, the Intergovernmental Panel on Climate Change (“IPCC”) stated that “[e]leven of the
last twelve years (1995- 2006) rank among the twelve warmest years in the instrumental record of
global surface temperatures (since 1850).”5 The IPCC reported that temperature increases have
occurred throughout the world, but most significantly at higher northern latitudes.6 The melting of
Arctic ice has often been called “the canary in the coal mine” of global warming.7 In 2007, Arctic ice melted
at record levels, causing the opening of the fabled Northwest Passage to navigation for the first time.8
During the same summer, a record 552 billion tons of ice melted from the Greenland ice sheet.9 It is hard to
overstate the significance of melting in Greenland. If global warming continues unabated, climatologists
predict that the entire Greenland ice sheet would melt, causing several meters of sea level rise and
coastal flooding that could imperil much of the Eastern United States.10 While some skeptics argue
that global warming is part of normal climate change,11 few climatologists agree. The earth has
experienced periods of cooling and warming over time, but warming has never occurred at the rate
that it is happening today. The most recent IPCC report noted that “[m]ost of the observed increase in
globally-averaged temperatures since the mid-20th century is very likely due to the observed increase in
anthropogenic [greenhouse gas] concentrations.”12 Anthropogenic greenhouse gases include carbon dioxide,
methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. Carbon dioxide is by
far the most significant of the greenhouse gases, accounting for approximately seventy-five percent of
anthropogenic greenhouse gas emissions between 1970 and 2004.13 Annual global emissions of carbon
dioxide increased “almost fivefold in the past century,” and these emissions “have tripled since 1950.”14 The
most significant contributing factor in the carbon dioxide emissions increase is the burning of fossil
fuels for electricity, heating, air conditioning, and transportation; land- use changes, particularly
deforestation, also have played a significant but smaller role.15
U.S. Key to Warming

U.S. needs to act now – it contributes 25% of global CO2 emissions
Historically, the United States is the largest contributor to global warming, responsible for
approximately twenty-five percent of global carbon dioxide emissions.16 China now emits as much
greenhouse gas as the United States,17 and India is not far behind,18 but the United States remains well
ahead of these countries in per capita greenhouse gas emissions.19 Moreover, in terms of cumulative
greenhouse gas emissions, the United States is by far the world leader;20 no other nation comes close.
Compounding the climate change problem is the fact that greenhouse gas emissions continue to grow
at an alarming rate. If greenhouse gas emissions were to remain constant at current levels, many parts
of the world still might be inhabitable by the end of the century.21 Yet the global rate of greenhouse
gas emissions is not stabilizing; it is accelerating. The rate of global greenhouse gas emissions due to
human activity grew by seventy percent between 1970 and 2004.22 With the rapid industrialization of China
and India, and absent efforts to control greenhouse gas emissions there and in the rest of the world, carbon
dioxide emissions are projected to grow by fiftyfive percent globally between 2004 and 2030.23 One of the
cruel ironies of the climate change crisis is that developed countries like the United States have
contributed the most to global warming,24 yet less developed countries will suffer the worst ill
effects.25 Part of the challenge facing less developed countries is that many of them are located in
regions of the world where natural resources, most notably water and food supplies, are more scarce
even without the detrimental effects of global climate change.26 In addition, both because of those
natural resource limitations and economic constraints, less developed countries will be less able to
adapt to climate change when it occurs.27
Reducing Emissions Now Key

( ) Reducing emissions NOW is key to slow the rate of warming
Significant reductions in greenhouse gas emissions must occur during the next ten to twenty years to
avoid the worst consequences of global warming. Climatologists warn that we must limit global warming
to approximately 2°C or 4°F to avoid catastrophic environmental effects.28 While those numbers may not
seem significant in 2008, after one of the coldest winters on record in parts of the United States, it
merits emphasis that average temperatures have only varied by 1.8°F during the last 10,000 years.
Since the end of the last ice age, average temperatures have only increased by 5 to 9°F.29 To limit global
warming to 2°C or 4°F will require stabilizing carbon dioxide concentrations in the atmosphere at
around 450 parts per million (“ppm”), and some of the most recent analyses recommend stabilizing at 400
ppm or even lower to prevent going above this temperature threshold.30 To put those numbers in context,
preindustrial carbon concentrations in the atmosphere were 280 ppm; today, carbon concentrations in the
atmosphere are approximately 380 ppm, which is higher than the natural range over the last 650,000 years.31
At current rates carbon concentrations will increase by 2 ppm each year, which means that, without
reductions in carbon dioxide emissions, carbon concentrations would reach 450 ppm before the middle of
this century. Unfortunately, unless we take steps to reduce carbon dioxide emissions, we are likely to
reach 450 ppm even sooner, because, as noted above, the rate of carbon dioxide emissions is increasing
so rapidly.32
Cap and Trade Solves Climate Change

( ) Cap-and-trade programs effectively regulate CO2 and prevent climate change
20, 2008
The first criterion any proposed climate policy must meet is environmental effectiveness: Can the
proposed instrument achieve its intended targets? This will depend, in the case of a standards-based
approach, on the technical ability of policymakers to design and the administrative ability of
governments to implement standards that are sufficiently diverse to address all of the sources of CO2
emissions in a modern economy. In the case of a tax, it will depend on the ability of political systems to
impose taxes that are sufficiently high to achieve meaningful emissions reductions (or limits on global
greenhouse gas concentrations, or limits on temperature changes).
The evaluation must also consider how certain it is that the proposed policy will achieve its emissions or
other targets. Different policy designs may be expected to achieve identical targets, but with different degrees
of certainty. A cap-and-trade system can achieve emissions targets with high certainty because
guaranteed emissions levels are built into the policy. With a carbon tax or technology standards, on the
other hand, actual emissions are difficult to predict because of current and future uncertainty about future
energy prices or how quickly new technologies will be adopted. Such policies may aim to achieve particular
emissions targets, but actual emissions may either exceed or fall below those targets, depending on factors
beyond policymakers’ control.
Moreover, the tendency for exemptions to be granted from taxes and standards so as to address distributional
issues weakens the environmental effectiveness of these instruments (Ellerman 2007). By contrast,
distributional battles over the allowance allocation in a cap-and-trade system neither raise the total
cost of the program nor affect its climate impacts.
( ) A cap-and-trade system averts climate change while preserving economic growth

Tim Hargrave, Senior Policy Analyst at the Center for Clean Air Policy, March 1998, “US Carbon Emissions
Trading: Description of an Upstream Approach,” online: http://www.ccap.org/pdf/upstpub.pdf, accessed June 20,
2008
Around the world, there is growing consensus in favor of addressing global climate change. Evidence
from economists suggests that well-constructed policies could achieve reductions in greenhouse gas
(GHG) emissions while still allowing economic growth. One of the most promising policy options for
reducing emissions is emissions cap-and-trade.
Under a trading program, a cap would be set limiting the total level of GHG emissions over a specified
period of time, and companies would be allotted emissions allowances. Each allowance would represent the
right to emit one ton of carbon, or to produce, process, transport or sell one ton of embodied carbon
emissions. 1 Companies that reduced their emissions to below allowed levels could sell the allowances
they did not need, while companies that exceeded their GHG emissions targets would buy additional
allowances.
A US greenhouse gas cap-and-trade system could be based on either an “upstream” model, which would
regulate fossil fuel producers, or a “downstream” system, which would regulate fuel users. This paper
describes how an upstream GHG system might work, and makes the case that such a system would be an
effective, feasible and fair approach to domestic climate change policy.2
Cap and Trade Solves Climate Change – Economy-Wide Key

( ) An economy-wide cap is key to solve warming – otherwise the entire system breaks
down and emissions can even increase
20, 2008
An economy-wide cap provides the greatest certainty of achieving a given national emissions target.
Limiting the scope of coverage to a subset of emissions sources leads to emissions uncertainty through
two channels. First, exogenous changes in emissions from unregulated sources can cause national
emissions to deviate from expected levels, even if emissions from regulated sources meet the target.24
Second, a limited scope of coverage can cause leakage, in which market adjustments resulting from the
regulation lead to increased emissions from unregulated sources outside the cap that partially offset
reductions under the cap. For example, a cap that includes emissions by the electric power sector (and
thereby affects electricity prices) but excludes emissions from natural gas or heating oil use in commercial
and residential buildings may encourage substitution of unregulated natural gas or oil heating for electric
heating in new buildings. As a result, increased emissions from natural gas and oil heating will offset some of
the reductions achieved in the electric power sector.
Cap and Trade Solves Climate Change – Innovation/Renewables

Cap and trade is key to a low-carbon economy and innovations
Moreover, cap-and-trade makes sense. Markets are essential to creating a low-carbon economy, and a
cap-and-trade program should be at the core of a greenhouse gas emission reduction strategy. Once
businesses have to factor the cost of emitting CO2 (and other greenhouse gases) into their bottom lines,
the power of the marketplace will start to push toward efficiency, low-carbon fuels, renewable energy,
and carbon-capture-and-storage technologies for coal-fired power. Market-based pricing is a critical
part of the equation but will not work to rapidly transform our economy to a low-carbon model without
accompanying public investment in policies to reduce energy costs for low- and middle-income Americans
and complementary clean energy and innovation policies.
Cap and Trade Solves Climate Change – Spillover

( ) Command and control regulations are inevitable as climate change spins out of control
– implementing cap-and-trade now saves the economy and prevents catastrophic climate
change
Gary C. Bryner, Research Associate, Natural Resources Law Center, University of Colorado School of Law, and
Professor, Public Policy Program, Brigham Young University, Summer 2004, Tulane Environmental Law Journal,
17 Tul. Envtl. L.J. 267, p. 299
Finally, carbon trading programs can produce valuable experience about how market-based systems
can work to find the most cost-effective ways to reduce greenhouse gas emissions and help secure a
stable climate. Beyond the benefits that accrue to more efficient operations, voluntary carbon trading
programs can produce experience that can guide policy makers in designing future regulatory
programs. Companies that established voluntary greenhouse gas reduction programs have found that
establishing that goal has provided an additional incentive to identify and invest in improved efficiency and
waste reduction. In many cases, emission reductions goals have been achieved while also reducing costs.
In one sense, such voluntary programs have clearly been shown to work. However, unless every
company adopts emission reduction goals very soon, we will not likely be able to achieve the emission
reductions that scientists suggest are critical to reduce the threat of catastrophic climate change to a
manageable level. Mandatory programs are inevitable, but voluntary programs can help generate
support for the development of a regulatory program that, if well designed, will harness emissions
trading to achieve the kind of emission reductions required to stabilize the climate, and produce
valuable experience for designing such a program.
Cap and Trade Now Solves Wars from Warming

( ) Action on cap-and-trade now is critical to avert war across the globe brought on by
warming
Jeff Poor, Business and Media Institute, 6-3, 2008, “Boxer: 'Recession' is 'Precisely' the Right Time for Economic
Upheaval of Cap-and-Trade,” online: http://www.businessandmedia.org/printer/2008/20080603154602.aspx,
accessed June 23, 2008
Conventional wisdom suggests that times of high economic growth would be the most appropriate
occasion to enact legislation that could be very expensive for American taxpayers.
That’s not the case for Democratic California Sen. Barbara Boxer. Boxer, who is the chairwoman of the U.S.
Senate Environment and Public Works Committee and advocating the Lieberman-Warner cap-and-trade
legislation, said a “recession” is the best time to do it because it will bring us “hope.”
“[S]ome of our colleagues will say this: Why do this now? We are in a recession. Precisely because we are in
a recession is why we should be doing this,” Boxer said on June 3 on the floor of the U.S. Senate. “This bill
is the first thing that brings us hope.”
Boxer painted a doom-and-gloom scenario in her remarks from the floor. She warned that if action
isn’t immediately taken by the Senate, we would see “desperate refugees throughout the world,”
“droughts and floods worse than the ones we have seen,” and when refugees move to escape these
calamities, we will see “wars develop in all parts of the world.”
AT: Warming Good

( ) The chance that warming has some benefits isn’t large enough to outweigh the risks –
cap and trade is a critical precautionary step to avoid catastrophic, unpredictable
consequences of warming
17 Tul. Envtl. L.J. 267, p. 297-299
It is quite possible that some benefits may result from climate change, such as increased crop yield in
some areas, increased timber yields in some regions, increased water availability in some water-scarce
regions, reduced winter mortality in some areas, and reduced energy demand for space heating. n274
Some may argue that not enough is known about the nature of climate change to take action now, and
that current and future generations will be better served if governments and the private sector invest in more
research and emphasize economic growth. As more wealth is generated, those financial resources will be
available to fund whatever actions are eventually required and to mitigate the effects of adverse
developments that may occur.
Nevertheless, there are several reasons why the prudent position is to pursue some preventative
measures now. Uncertainties can cut both ways. They can result in even greater, more devastating
impacts. Climate change may not be linear, gradual, and manageable. There may be climate tipping
points where the next increment of climate change produces dramatic, nonlinear, disruptive, unforeseeable,
and [*298] unmanageable results. Recent studies, some of which have been commissioned by the George
W. Bush administration, including the National Academy of Science's Committee on the Science of Climate
Change, which issued a report in 2001 that generally endorsed the main conclusions of the UN-sponsored
research on climate change, n275 and a December 2001 National Academy of Sciences report that concluded
that climate changes could occur with startling speed, n276 provide compelling cases for precautionary
action. Reducing the threat of climate change can also produce other economic, environmental, and
equity benefits. Pollution prevention measures make economic sense, and investments in energy efficiency,
conservation, cleaner fuels, and other actions that reduce wastes contribute to a dynamic, growing, efficient,
and ecologically sustainable economy independent of climate stabilization goals.
For residents of the industrialized nations, climate change is an ethical issue. Those responsible for most
greenhouse gases are not the same people who will suffer the consequences of climate change. Residents of
industrialized nations are mostly responsible for the threat, and they have the resources to protect themselves
from modest changes and disruptions. Developing countries lack the resources to protect their citizens
against the effects of climate change. It is simply not tenable to argue that satisfying the continually growing
demand by Americans for cheap energy must outweigh the need to contribute to global solutions for climate
change.
Carbon trading is only part of an efficient and effective response to reducing the threat of climate
change. Investments in energy and materials efficiency, conservation, pollution prevention, renewable
energy, and more efficient resource use make sense for economic and environmental reasons apart from
climate change, and demand for more efficient energy and industrial facilities will increase. Because
greenhouse gases, once released, may stay in the atmosphere for a hundred years or longer, immediate
precautionary action is prudent, along with a long-term risk reduction strategy. The longer we wait to
reduce the threat of climate change, the larger the problem grows and the narrower our options
become. The sooner we act, the more options we will have in the future. Carbon trading's promise to
encourage the most cost-effective ways of reducing greenhouse gas emissions makes it a key [*299]
element in generating political support for a cautious, precautionary policy concerning climate change.
***Trade Wars Advantage

Trade Wars Advantage – 1AC

( ) Lack of U.S. action on climate change is threatening an all-out trade war between the
U.S. and EU – Europe will require companies outside the EU to buy carbon allowances
before entering their markets
Daniel Cressey, writer for Nature Magazine, January 22, 2008, “Climate change trade war,” online:
http://blogs.nature.com/news/thegreatbeyond/2008/01/climate_change_trade_war.html, accessed June 23, 2008
Europe and the US could be headed for a trade war over climate change. In a speech yesterday José
Barroso, president of the European Commission, said he would be ready to force companies outside
the EU to buy carbon allowances to ensure that companies inside were not disadvantaged by Europe’s
tougher emissions targets (speech). While this apparently went down well with the audience (of European
businessmen) it hasn’t gone down so well with America. Reuters highlights that US Trade Representative
Susan Schwab said that an earlier version of the EU plans seemed to be an excuse to close the European
market and amounted to something like protectionism. More worryingly, the notes for speech delivered by
Schwab last week contains the statement, “The unilateral imposition of restrictions can lead to
retaliation, and dramatically impact economic growth and markets worldwide – while accomplishing
nothing or worse when it comes to advancing environmental objectives.” The US approach has also been
backed by the UK, most recently by energy minister Malcolm Wicks saying today the government was
“against any measures which might look like trade barriers” and warning that some in Europe “could use this
as a kind of secret weapon, as it were, to bring about protectionism” (listen to Wicks on BBC or read his
comments on Reuters). Barroso also appears to be picking a fight with his own trade commissioner, Peter
Mandelson. Mandelson is on record as saying the restrictions are not the way forward (BBC)*. France’s
leader Nicolas Sarkozy has been banging this drum for a while, telling Nature before he was elected last year
last year, “Countries that behave like stowaways hitching a free ride, making no effort to reduce their
emissions, should not continue to benefit from the competitive industrial advantage this gives them.”
However Barroso’s forthright speech – made in the face of British opposition – represents something of a
ratcheting up of the rhetoric level. In the current economic climate any excuse to shore up their own
country’s economy at the expense of someone else’s is not going to be overlooked by politicians. This
one could run and run.
( ) The U.S. will retaliate to any EU attempt at taxing carbon-heavy imports

EurActiv, January 28, 2008, “EU warned of trade war over climate measures,” online:
http://www.euractiv.com/en/trade/eu-warned-trade-war-climate-measures/article-169878, accessed June 23, 2008
The EU found itself on a collision course with its major trading partners last week after the
Commission announced it was considering forcing importers to pay pollution charges on carbon-heavy
imports. The Commission's threat of climate-related trade sanctions aimed at putting EU and third country
producers on a level footing appears mainly targeted at convincing governments in Washington and
Beijing to adhere to a global deal on climate change. Indeed, the EU executive has confirmed that it will
not decide on the introduction of any such measures before 2011. However, the mere fact that the EU is
considering such action has already caused outrage among its trade partners. The United States has
warned it would "vigorously" resist any move to introduce a tax on American products based on its
position in climate change negotiations. Last week, US Trade Representative Susan Schwab accused the
EU of using the climate as an excuse for protectionism.

( ) That retaliation would snowball globally and destroy the WTO
EurActiv, January 28, 2008, “EU warned of trade war over climate measures,” online:
http://www.euractiv.com/en/trade/eu-warned-trade-war-climate-measures/article-169878, accessed June 23, 2008
Commission President José Manuel Barroso said: "There would be no point in pushing EU companies to cut
emissions if the only result is that production, and indeed pollution, shifts to countries with no carbon
disciplines at all." A spokesman from the US Mission to the EU told EurActiv that while the US was
encouraged to see that the EU's new climate package does not introduce any trade-restrictive action on
imports, the US would be "vigorous in resisting calls for any form of trade protectionism as a response
to climate change." Furthermore, the US appears to have won British support. "We are against any
measures which might look like trade barriers […] There is always the danger that the protectionists in
Europe - and they do exist - could use this as a kind of secret weapon to bring about protectionism," British
Energy Minister Malcolm Wicks told the BBC. France, however, is continuing to push for protection against
unfair international competition to avoid massive delocalisation of EU companies. The establishment of a
border adjustment mechanism is a "fundamental element" of the package and France will work "very
closely" with the European Commission between now and 2011 on proposals to set up the scheme,
insisted French Minister of Ecology and Sustainable Development Jean-Louis Borloo. According to the
Financial Times, Ujal Singh Bhatia, India's ambassador to the WTO, warned against the risk of
retaliation and litigation from the EU's trade partners if it goes ahead with trade restrictive measures.
He said: "Unilateral measures at this stage would create contentiousness and lead to charges of
protectionism […] If the countries imposing such measures invoke Gatt provisions to justify them, the
dispute settlement mechanism in [the] WTO would face serious challenges and create divisions along
North-South lines."
( ) WTO collapse causes global nuclear war

Copley News Service December 1, 1999, Wednesday
For decades, many children in America and other countries went to bed fearing annihilation by nuclear
war. The specter of nuclear winter freezing the life out of planet Earth seemed very real. Activists
protesting the World Trade Organization's meeting in Seattle apparently have forgotten that threat. The truth
is that nations join together in groups like the WTO not just to further their own prosperity, but also to forestall
conflict with other nations. In a way, our planet has traded in the threat of a worldwide nuclear war for
the benefit of cooperative global economics. Some Seattle protesters clearly fancy themselves to be in the
mold of nuclear disarmament or anti-Vietnam War protesters of decades past. But they're not. They're
special-interest activists, whether the cause is environmental, labor or paranoia about global government.
Actually, most of the demonstrators in Seattle are very much unlike yesterday's peace activists, such as
Beatle John Lennon or philosopher Bertrand Russell, the father of the nuclear disarmament movement, both
of whom urged people and nations to work together rather than strive against each other. These and other war
protesters would probably approve of 135 WTO nations sitting down peacefully to discuss economic issues
that in the past might have been settled by bullets and bombs. As long as nations are trading peacefully,
and their economies are built on exports to other countries, they have a major disincentive to wage war.
That's why bringing China, a budding superpower, into the WTO is so important. As exports to the United
States and the rest of the world feed Chinese prosperity, and that prosperity increases demand for the goods
we produce, the threat of hostility diminishes. Many anti-trade protesters in Seattle claim that only
multinational corporations benefit from global trade, and that it's the everyday wage earners who get hurt.
That's just plain wrong. First of all, it's not the military-industrial complex benefiting. It's U.S. companies
that make high-tech goods. And those companies provide a growing number of jobs for Americans. In San
Diego, many people have good jobs at Qualcomm, Solar Turbines and other companies for whom overseas
markets are essential. In Seattle, many of the 100,000 people who work at Boeing would lose their
livelihoods without world trade. Foreign trade today accounts for 30 percent of our gross domestic product.
That's a lot of jobs for everyday workers. Growing global prosperity has helped counter the specter of
nuclear winter. Nations of the world are learning to live and work together, like the singers of anti-war
songs once imagined. Those who care about world peace shouldn't be protesting world trade. They should be
celebrating it.

( ) Fortunately, the plan solves global trade tension
Peter Fontaine, co-chair of the Energy, Environmental & Public Utility Practice Group of the Cozen O'Connor
law firm, formerly a Clean Air Act enforcement lawyer with the U.S. Environmental Protection Agency, August
2004, “Global Warming: The Gathering Storm,” online: http://www.pur.com/pubs/4419.cfm, accessed June 30,
2008
By adopting some form of national legislation that begins to internalize the costs of global warming, the
United States would blunt any effort by the EU to impose trade sanctions on U.S. goods. The EIA
analysis points out one fundamental conclusion. The reduction of global warming gas emissions called for
under the Kyoto Protocol will increase electricity prices and therefore the cost of goods. Even under the
relatively modest goals of the McCain Lieberman bill, electricity prices will increase due to the
internalization of the costs of the cap and trade system.
The risk of trade sanctions by America's largest trading partners due to the failure of the United States
to control CO2 emissions should be a real concern to U.S. policy-makers. If the United States continues
to resist global pressure to reduce its CO2 emissions, it will largely cede control over how the rules
implementing Kyoto are written and risk trade sanctions by trading partners seeking to reduce the
disparity in production costs.
To avoid this negative outcome, the United States should pursue a more pragmatic middle path that
confronts the problem of global warming by laying out the necessary domestic framework and economic
incentives to create a domestic CO2 emissions market that produces efficient CO2 reductions, much like
the Acid Rain Trading Program. In this way, America can develop new technologies, regain its credibility in
the global deliberations over how to combat global warming, and avoid the risk of a damaging trade war
with the EU.
Trade Wars Advantage – Internal Link

EU’s tariff proposal will lead to global trade tension tension
Financial Times, January 23, 2008, “Carbon import tax could provoke trade war,” online:
http://www.ft.com/cms/s/0/0bcb3cac-ca01-11dc-b5dc-000077b07658.html?nclick_check=1, accsessed June 23,
2008
Plans to force importers to pay the same greenhouse gas emission charges as domestic producers could
provoke a trade war of retaliation and litigation, officials and lawyers have warned. The plans, being
considered by the US Senate and floated by the European Commission, are intended to prevent
production shifting to laxer regimes abroad after countries impose carbon controls. But although
supporters argue they will comply with the General Agreement on Tariffs and Trade (Gatt), the treaty
that underlies the World Trade Organisation, officials and lawyers say that affected countries such as
China and India are likely to resort to litigation or retaliation. Ujal Singh Bhatia, India’s ambassador to
the WTO, said: “If the countries imposing such measures invoke Gatt provisions to justify them, the dispute
settlement mechanism in [the] WTO would face serious challenges and create divisions along North-South
lines.” Lawyers said that although the measures might be made compatible with WTO rules, it is likely
there would be years of uncertainty and conflict. Greg Mastel, adviser at the law firm Akin Gump, said:
“Meeting the standards for compliance will be hard, and this is a high-stakes case.” Settling this through
litigation “could put a lot of strain on the [WTO] system”. Mr Bhatia warned against hasty action. “Even
within the EU and the US the discussion has only recently begun and there appears to be no consensus
as yet,” he said. “Unilateral measures at this stage would create contentiousness and lead to charges of
protectionism.”
***Economy
Cap and Trade Good – Economy

A cap-and-trade system would create a new economic commodity and help American businesses flourish.
Evans et al, June 2002
(Matt Evans, Beth Goldbert, Paige Brown and Bruce Kaplan, “Watching Our Assets: Climate Policy Should Not Be
Corporate Welfare,” Redefining Progress)
If the federal government initiates a permit trading system to prevent climate change, the right to emit
greenhouse gases will become valuable, regardless of how permits are distributed. Limiting greenhouse
gas emissions is equivalent to restricting access to the atmosphere, which emitters typically have been
allowed to use freely. This restriction makes emission permits valuable because it makes the supply of
atmosphere emissions credits scarce relative to demand. When the right to emit becomes scarce and
therefore has economic value, those who own the rights will collect that value in the form of “scarcity
rents.” If companies have the right to emit carbon dioxide into the atmosphere free of charge, the scarcity
rents they collect will show up on their balance sheets as enormously valuable assets equivalent to the
market price of the permits (whether they use the permits themselves or sell them). Doling out
emissions permits based on lobbying connections or political expertise, rather than any benefit to the
common good, would be a clear case of corporate welfare. One scenario would have the government
“grandfather” permits, or give them to companies for free, based on their past emission levels. This policy
would give firms that have polluted the most in the past the most emission permits in the future.
Cap and Trade Popular with Businesses

( ) Emissions trading is favored by businesses
17 Tul. Envtl. L.J. 267, p. 268-269
While scientists from the United States have played a leading role in developing the science of climate
change, U.S. political leaders have largely resisted global efforts to require major cuts in emissions of
greenhouse gases. n6 Instead, multinational corporations, state and local government leaders in the United
States, and leaders of other nations have taken the lead in designing responses to the threat of disruptive
climate change. n7 A central element of the strategy developed by businesses and governments to
reduce greenhouse gas emissions is the development of emissions trading programs. n8 In such
programs, corporations set goals for reducing total greenhouse gas emissions and issue carbon allocations or
targets to units of the company. n9 These units achieve their goals by making changes in materials or
processes to improve efficiency and reduce emissions. n10 The companies allow these units to meet their
goals by buying and selling emission credits; some also allow them to purchase carbon credits from
agricultural sequestration, tree planting, and other activities. n11 Units that can reduce their emissions
below their targets can sell their extra allocations to units that exceed their target. n12 As a result of
this type of trading, many corporations are making significant progress in reducing their emissions of
carbon dioxide and other greenhouses gases. n13 These companies have [*269] concluded that reducing
emissions makes sense: n14 investments in reduced waste and improved efficiency lower costs and
position companies for future business opportunities in addition to minimizing the threat that climate
change poses. n15 A number of companies have made ecologically sound and economically profitable
changes in the design, production, and distribution of goods and services.
Cap Phase-In Solves Economy Links

( ) Gradually phasing in stringent caps avoids the link to their economy arguments
20, 2008
Because climate change is a long-term problem, policies can be somewhat flexible regarding when
emissions reductions actually occur. Policies that take advantage of this “when” flexibility, for example
by setting annual emissions targets that gradually increase in stringency, can avoid many of the costs
associated with taking stringent action too quickly, without sacrificing environmental benefits (Wigley,
Richels, and Edmonds 1996). Premature retirement of existing capital stock can be avoided, as can many
production and siting bottlenecks. Gradually phased-in targets also provide time to incorporate
advanced technologies into long-lived investments (Goulder 2004; Jaffe, Newell, and Stavins 1999).18
Thus, for any given cumulative emissions target or associated atmospheric concentration objective, a climate
policy’s cost can be reduced by gradually phasing in efforts to reduce emissions.
The long-term nature of the climate problem and the need for technological change to bring about lower-cost
emissions reductions also make it essential that the caps be instituted gradually over a long period. The
development and eventual adoption of new low-carbon and other relevant technologies will depend on
the predictability of future carbon prices, which themselves will be affected by the cap’s constraints.
Therefore the cap-and-trade policy should incorporate medium- to long-term targets, not just short-
term targets.
Gradual changes in the economy solve all the impacts

20, 2008
Of course, the impacts on coal producers and other industries depend on the stringency of the emissions cap
—the more stringent the cap, the higher the market price of allowances, and the greater the impact on
affected industries. Rather than creating abrupt and significant impacts, policies that gradually
increase a cap’s stringency may only slow the expansion of even the most affected industries, lessening
transition costs as workers, communities, and regions adjust.59
AT: Cap and Trade Kills GDP

( ) Drastically reducing carbon emissions doesn’t hurt GDP
Weyant, 1993
(John P., “Costs of Reducing Global Carbon Emissions,” The Journal of Economic Perspectives, Vol. 7, No. 4,
(Autumn, 1993), 27-46)
The cost of a long-run global carbon emissions control program designed to limit emissions to their 1990
level (about 6 billion metric tons), is projected to be about 2.5 percent of world GDP by the year 2043, plus
or minus 1 percent. If world GDP were projected to grow at 2.3 percent per year over the next 50 years
in the absence of a control program, a control program phased in over that period would only lower
that growth rate to 2.25 percent per year. Thus, if climate change turns out to be a very serious
problem, it can be controlled without eliminating or even noticeably reducing long-run economic
growth. On the other hand, 2.5 percent of the almost $90 trillion dollar world economy in 2043 (in 1990
dollars) would amount to about $2.25 trillion dollars per year (2.5 percent of current world GDP is over half
a trillion dollars). Given other pressing world problems, this sum represents a substantial long-run commit-
ment of societal resources.
Reductions would only be 1% less then expected at most.

20, 2008
Impacts on Aggregate Costs to the Economy The cap-and-trade system, like any regulatory initiative,
affects the behavior of both individuals and firms, causing reallocation of resources and thereby
causing output to grow more slowly than it would in the absence of the policy. Impacts on GDP are
measured relative to no policy (BAU), and so the reductions in GDP do not indicate that output would be
below current levels, but rather that output would be lower than what would otherwise be expected.53
Consistent with findings from other studies, the analysis indicates significant but affordable impacts on GDP:
reductions below BAU are generally less than 0.5 percent in each year of the program for the less
aggressive cap trajectory and range up to 1 percent in each year for the more aggressive policy (Table
9).54 These impacts on GDP by 2050 are equivalent to average annual GDP growth of 2.895 percent and
2.891 percent under the two cap trajectories, compared with 2.901 percent in the BAU case.55
AT: Economy Links – Delay Makes it Worse

( ) Delays in implementing cap-and-trade will only make the initial emissions caps more
stringent
20, 2008
It would be a mistake, however, to think that “when” flexibility is a reason to allow delay in enacting a
mandatory policy. On the contrary, the earlier a mandatory policy is established, the more flexibility
there will be to set emissions targets that gradually depart from BAU levels while still achieving a
longrun objective for atmospheric concentration. The longer it takes to establish a mandatory policy,
the more stringent the near-term emissions targets will need to be to achieve a given long-run
concentration objective.
AT: Cap and Trade Hurts Competitiveness

Cap and trade establishes a fair market
20, 2008
“A Cap-and-Trade System Will Put the United States at a Competitive Disadvantage with Other Countries.”
Ever since the passage of the Byrd-Hagel resolution in the U.S. Senate in 1997, there has been great concern,
much of it understandable, about the effects of climate policy on domestic manufacturing and employment.
In principle, any domestic policy that drives up the cost of producing goods and services in proportion to the
CO2 emissions caused by that production can shift comparative advantage in those goods and services to
other countries that are not taking on similar costs. This is the phenomenon behind emissions leakage. It is
for this reason that the cap-and-trade system proposed here is linked to the actions of other key
nations. In particular, imports of highly carbon-intensive goods from countries that have not taken
climate policy actions comparable to those in the United States would be required to hold appropriate
quantities of allowances. This would establish a level playing field for domestically produced and
imported products, would reduce emissions leakage, and may help induce some key developing
countries to join an international agreement.
***Solvency
Cap and Trade Solves – General

Cap and trade is the cheapest most effective system to solving warming
20, 2008
The need for a domestic U.S. policy that seriously addresses climate change is increasingly apparent.
But a policy that meaningfully reduces emissions of CO2 and other greenhouse gases will not come
cheap: estimated annual costs are on the order of 1 percent of GDP. These high stakes make it critical to
identify the most effective, lowest-cost, and most equitable policy at the outset, because any policy
design once in place can be difficult to change. Policy analysts generally agree that the policy most likely
to optimize these three criteria will be one based on some form of market-based instrument for reducing
emissions: either a cap-and-trade system, based on emissions allowances, or a carbon tax. This paper has
argued that a cap-and-trade system is the better approach for the United States in the short to medium
term—and more likely to be politically successful. Besides providing greater certainty about emissions
levels, cap-and-trade offers several advantages: an easy means (partial free distribution of allowances) of
compensating for the inevitably unequal burdens imposed by climate policy; it is straightforward to
harmonize with other countries’ climate policies, which are much more likely to employ cap-and-trade
than tax approaches; it avoids the current political aversion in the United States to taxes; and it has a
history of successful adoption in this country. Given this judgment, the paper has further proposed a
specific cap-and-trade system that is scientifically sound, economically rational, and politically feasible.
Cap and Trade Solves – Empirics

( ) Experience with cap-and-trade systems for acid rain and ozone depletion proves
they’re environmentally beneficial and cost-effective
20, 2008
A cap-and-trade system was also used in the United States to help comply with the Montreal Protocol, an
international agreement aimed at slowing the rate of stratospheric ozone depletion. The protocol called
for reductions in the use of CFCs and halons, the primary chemical groups thought to lead to depletion.
The timetable for the phaseout of CFCs was later accelerated, and the system appears to have been
relatively cost-effective. The most important application in the United States to date of a market-based
instrument for environmental protection is arguably the cap-and- trade system that regulates SO2
emissions, the primary precursor of acid rain. The program, established under the U.S. Clean Air Act
Amendments of 1990, is intended to reduce SO2 and NOX emissions by 10 million tons and 2 million tons,
respectively, from 1980 levels. A robust market in SO2 allowances emerged under the program,
resulting in cost savings on the order of $1 billion annually compared with some command-and-control
alternatives (Carlson et al. 2000). The program has also had a significant environmental impact: SO2
emissions from the electric power sector decreased from 15.7 million tons in 1990 to 10.2 million tons in
2005 (U.S. Environmental Protection Agency 2005).
Cap and Trade Works – Empirics – Acid Rain

Cap and trade solves – Acid rain empirically proves
A cap-and-trade system will identify the necessary level of carbon reductions, and then allow the marketplace
to price the cost of those emissions. Moreover, the cap-and-trade market model boasts a great track
record in reducing acid rain. In fact, the United States actually “wrote the book” on cap-and-trade,
creating the oldest and arguably most successful emissions trading system for sulfur dioxide under the
acid rain program of the 1990 Clean Air Act Amendments, which has reduced SO2 emissions at a
fraction of anticipated costs and engendered health benefits exceeding program costs by more than 40
to 1. In this case SO2 credits were given away and not auctioned off as sources of SO2 were known and the
technology to deal with this pollutant was readily available. With CO2, technology to deal with the emissions
is still embryonic and therefore we need revenue to spur new technology curb this pollutant. In addition,
giving away credits “would exacerbate the regressivity of the price increases,” according to Peter R. Orszag,
Director of the Congressional Budget Office.
Cap and Trade Solves – Economic Growth, Warming, Oil

( ) A cap-and-trade system is key to economic growth, solving global warming and ending
oil dependence
The Center for American Progress, January 25, 2008, “Effective Cap-and-Trade System Requires Credit
Auction,” online: http://www.americanprogress.org/issues/2008/01/podesta_testifies.html, accessed June 23, 2008
Podesta spoke of a warming planet in crisis. He pointed to the recent discovery that the western Antarctica
ice sheet is melting faster than scientists had anticipated; costal erosion from rising sea levels; and
increased water scarcity that will lead to population migrations, which could create instability and
economic dislocation for millions of people around the globe. This resource scarcity, along with U.S.
dependence on foreign oil, presents a significant national security and foreign policy concern. Oil prices
already burden the average U.S. citizen with record costs for gasoline, and Podesta said that a time had come
when the “cost of doing nothing is greater than the cost of doing something.” Shifting from a high-
carbon economy to a low-carbon, sustainable economy is necessary, he said, to both restore U.S.
economic growth and to ensure national security. A cap-and-trade system could deliver a one-two
punch by reducing carbon emissions and generating additional government revenue to stimulate the
economy and invest in sustainable energy programs.
AT: Alt Causes/Cap and Trade Not Enough

( ) Even if cap and trade alone isn’t enough, it’s a pre-requisite to other actions, which
overwhelm all their alt-causes
17 Tul. Envtl. L.J. 267, p. 269-270
The reliance on emissions trading for reducing greenhouse gas emissions is controversial. Critics fear
that trading programs, if not carefully designed, result in reductions on paper but fail to produce actual
emission reductions. Emissions trading may seduce people into thinking they can escape making difficult
choices about changes in behavior and consumption that will ultimately be required to significantly reduce
the threat of climate change. Debates over carbon trading may also divert attention from direct actions such
as investing in energy efficiency and cleaner fuels that promise clear benefits. There are numerous challenges
to making carbon trading work as an effective way of reducing the threat of climate change. However, given
the promise of carbon markets in [*270] minimizing the costs of reducing greenhouse gas emissions,
including carbon trading in any voluntary or mandatory strategy has become a prerequisite for
generating the necessary political support.
AT: Cap and Trade Diverts Attention/Masks Problems

( ) The risk of cap-and-trade diverting attention from other solutions is very low
17 Tul. Envtl. L.J. 267, p. 270
The purpose of this Article is to trace the evolution of carbon trading, examine what is required to make
carbon markets work effectively, and assess the role of carbon markets in reducing the threat of climate
change. The emerging markets in carbon are a useful means of exploring the challenges encountered in
developing new markets, and the lessons learned here illustrate the costs and benefits of creating markets in
pursuit of public policy goals elsewhere. This Article argues that carbon trading can be part of an effective
response to the threat of climate change, yet it acknowledges there are considerable challenges in
designing and implementing effective trading programs and substantial risks that trading will not produce
significant emission reductions while diverting attention away from other actions that are required.
Despite the limitations of carbon trading, the threat of climate change is so serious and the benefits
from taking action so great that trading should be widely pursued as a way to help build support for
the more ambitious regulatory programs that are required to produce a significant reduction in greenhouse
gas emissions.
AT: California Proves Command Control Better

California’s difficulties were due to intrinsic weaknesses in its electrical system rather than
cap and trade legislation.
Ellerman et al, May 2003
(A. Denny Ellerman, Paul L. Joskow, David Harrison Jr., Professor at MIT, Professor at MIT, National Economic
Research Associate, Inc, Emissions trading in the U.S.: Experience, Lessons, and Considerations for Greenhouse
Gases, Pew Center for Global Climate Change)
Experience with the opt-in features of the Acid Rain Program and with the NOX RECLAIM Program could
be cited as counter-examples to the proposition that emissions trading has improved environmental
performance when compared with a command-and-control alternative, but these instances must be placed in
perspective, as we have attempted to do in the sections dealing with each. In the Acid Rain Program, the
issuance of allowances reflecting “baseline errors” constituted only a small percentage of the total number of
allowances and these extra allowances do not seem to have had any material effect on the achievement of the
program’s goals. Similarly, the additional RECLAIM NOX emissions in 2000 represented a small percentage
of the 2000 cap and, moreover, procedures were put in place to compensate for the shortfall in future years. It
seems unlikely that a command-and-control program would have been any more effective in reducing
emissions before and during the unique circumstances associated with the California electricity
problems of 2000-01. California’s electricity crisis was an extraordinary event and its principal lessons
relate to the proper design of competitive electricity market institutions and the transition to them. It
would be a mistake to draw many conclusions about environmental policy from the problems with
California’s experiment in electricity market deregulation.
AT: Clean Air Act proves Emissions trading doesn’t work

Although the Clean Air Act faced numerous enforcement roadblocks, current policies have
been adapted because of its shortcomings and are now seen as universally effective.
Gorman and Soloman, 2002
(Hugh S., and Barry D., “The Origins and Practice of Emissions Trading,” THE JOURNAL OF POLICY HISTORY,
Vol. 14, No. 3)
In the 1970s, emissions trading systems moved from the realm of neoclassical economic theory to real-world
applications. As it happened, the first uses of emissions trading were an unanticipated consequence of
the Clean Air Act of 1970, which established air-quality standards based on health. In metropolitan areas
that failed to meet the required standards, various forms of trading emerged to allow increases in emissions
when cuts were also made. Designed in an ad hoc manner and involving the most polluted urban areas
of the United States, these programs lacked enforceable systems for monitoring and tracking
emissions. Many national environmental groups, most notably the Natural Resources Defense
Council (NRDC), opposed these early applications of air emissions trading.
Only later, in the late 1980s, would major environmental groups, such as the Conservation Foundation and
the Environmental Defense Fund (now known as Environmental Defense), become major proponents of
emissions trading. By that time, regulators had applied trading to a more successful application, the
effort to the phaseout of leaded gasoline, and were considering using a similar program to manage cuts
in sulfur dioxide emissions from large power plants. Today, the NRDC supports most advanced forms
of emissions trading. Groups such as the Sierra Club, Environmental Action, Greenpeace, and Communities
for a Better Environment (in California) still voice objections, but their concerns often have to do with issues
of design and equity. For example, environmental activists have accused several trading programs of
increasing environmental injustices by exacerbating localized air pollution “hot spots” in poor and minority
communities, a concern that can be addressed by changes in the design of trading rules.7 Over the years,
similar concerns raised by critics have been addressed by the designers of trading programs.8 However, some
important issues, such as the philosophy governing the allocation of tradable credits, have received little
attention because no real challenge emerged. In allocating the right to emit, significant attention has been
paid to the details of various schemes, but not to the general philosophy of allocation.
AT: Cap and Trade Doesn’t Solve Transportation Sector

Cap and trade means emission reductions economy-wide
20, 2008
“Upstream Cap-and-Trade Will Have Minimal Effects on the Transportation Sector.” It is quite true that the
greatest share of emissions reductions under cap-and-trade would occur in the electric power sector, followed
by the industrial sector, with much smaller percentage reductions in the transportation and other sectors.
Given that approximately one-third of U.S. CO2 emissions from energy consumption come from the
transportation sector, this may seem like an opportunity missed for deeper cuts in emissions. But from
an economic (that is, cost-effectiveness) perspective, such an outcome could still be both appropriate
and desirable, if the reason for the policy is to combat climate change. An upstream cap-and-trade
system that provides a uniform price signal for cost-effective emissions reductions economy-wide will
lead to those reductions being undertaken wherever they are least costly. The result will almost
certainly not be proportionate reductions in emissions from each type of source or each sector. If there
are other, non-climate-related reasons, such as oil dependency, for concerns about the use of
transportation fuels, those concerns should be addressed through other policies appropriate to the
problem (Sandalow 2007).
AT: Entry Barriers/Bad for Competition

This argument is false for two reasons:
1) Annual auctions solve compeition
2) No empirical proof from past programs
20, 2008
“A Cap-and-Trade System Will Create Barriers to Entry and Reduce Competition.” It is true, in principle,
that incumbent firms could use their emissions allowances strategically to keep new entrants from
competing in their product markets. This is why the SO2 allowance trading program auctions
allowances annually so that the government can be a source of allowances of last resort. In fact, there is
no evidence from any implemented cap-and-trade system of incumbent firms withholding allowances
from the market for strategic purposes. The proposed CO2 cap-and-trade system includes a large
auction of allowances from the very beginning.
***Mechanisms
FYI: Plan Ideas
20, 2008
The need for a domestic U.S. policy that seriously addresses climate change is increasingly apparent. A cap-
and-trade system is the best approach in the short to medium term. Besides providing certainty about
emissions levels, cap-and-trade offers an easy means of compensating for the inevitably unequal burdens
imposed by climate policy; it is straightforward to harmonize with other countries’ climate policies; it avoids
the current political aversion in the United States to taxes; and it has a history of successful adoption in this
country. The paper proposes a specific cap-and-trade system with several key features including: an upstream
cap on CO2 emissions with gradual inclusion of other greenhouse gases; a gradual downward trajectory of
emissions ceilings over time to minimize disruption and allow firms and households time to adapt; and
mechanisms to reduce cost uncertainty. Initially, half of the program’s allowances would be allocated through
auctioning and half through free distribution, primarily to those entities most burdened by the policy. This
should help limit potential inequities while bolstering political support. The share distributed for free would
phase out over twenty-five years. The auctioned allowances would generate revenue that could be used for a
variety of worthwhile public purposes. The system would provide for linkage with international emissions
reduction credit arrangements, harmonization over time with effective cap-and-trade systems in other
countries, and appropriate linkage with other actions taken abroad that maintains a level playing field
between imports and import-competing domestic products.
20, 2008
The United States can launch a scientifically sound, economically rational, and politically feasible approach
to reducing its greenhouse gas emissions by adopting an upstream, economywide CO2 cap-and-trade system
that implements a gradual trajectory of emissions reductions over time. The approach proposed here also
includes mechanisms to reduce cost uncertainty, such as multiyear compliance periods, provisions for
banking and borrowing, and possibly a cost containment mechanism to protect against extreme price
volatility. 15
Allowances under the system would be allocated through a combination of free distribution and open
auction. This is intended to balance, on the one hand, the legitimate concerns of those who will be
particularly burdened by this (or any) climate policy with, on the other hand, the opportunity to achieve
important public purposes with funds generated by the auctions. The share of free allowances would decrease
over time as the private sector adjusts to the carbon constraints, with all allowances being auctioned after
twenty-five years.
Offsets would be made available for both underground and biological carbon sequestration, to achieve short-
term cost-effectiveness and create long-term incentives for appropriate technological change. The cap-and-
trade system would be a federal program, with supremacy over all U.S. regional, state, and local systems, to
avoid duplication, double counting, and conflicting requirements. It would also provide for harmonization
over time with emissions reduction credit and cap-and-trade systems in other nations, as well as related
international systems.
FYI: Upstream vs. Downstream
2008
The US could implement a greenhouse gas (GHG) emissions cap-and-trade system either “upstream”, at the
level of primary fuel producers, or “downstream”, at the level of fuel users. An upstream system would
require fossil fuel producers to hold allowances for the potential greenhouse gas emissions embodied in their
fuels and would affect energy users by changing the prices of fossil fuels.
FYI: Explanation of Upstream
20, 2008
Any cap-and-trade system for CO2 must define the set of emissions sources that are capped (the scope of
coverage) and the point in the fossil fuel supply chain at which that cap is enforced (the point of regulation).
To achieve economy-wide coverage, the point of regulation should be upstream, collecting allowances
according to the carbon content of fuels at the point of their extraction, import, processing, or distribution.21
The first sellers of extracted fossil fuels would be required to hold allowances: for coal, at the mine shipping
terminus; for petroleum, at the refinery gate; for natural gas, at the first distribution point; and for imports, at
the point of importation. Such a cap would effectively cover all sources of CO2 emissions throughout the
economy (Table 1).22 Any upstream program should include a credit mechanism, to address both the small
portion of fossil fuels that are not combusted and the use of postcombustion emissions reduction
technologies, such as carbon capture and sequestration (CCS). It should also include a credit-based
arrangement for fossil fuel exports so that exporters are not placed at a competitive disadvantage relative to
foreign suppliers that do not face allowance requirements. Emissions reductions from CCS technologies can
be readily measured. Also, unlike some creditbased programs, a program for CCS runs no risk of granting
credits for fictitious emissions reductions: because emissions sources have no incentive to install CCS
equipment in the absence of a climate policy, emissions reductions achieved by CCS are clearly additional.
CCS technologies are expected to play a significant role in achieving long-run emissions reduction goals;
therefore such a credit mechanism is an essential component of an upstream cap.
FYI: Who Would/Should Get Permits
2008
Effective implementation of an upstream system would depend on determining the proper point in the fuel
production cycle to require allowances. Criteria to use in identifying the proper point of regulation include
the following:
· The program should capture as high a percentage as possible of the total life-cycle emissions associated
with a fuel. The choice of the point of regulation will affect this level of coverage; and
· the program should be administratively feasible. This means that the number of regulated entities,
company reporting requirements and government administrative costs must be minimized. In addition,
regulation must take place at a point where the carbon content of fuel (and therefore potential carbon
emissions) may be accurately estimated. Finally, the system must accurately account for fuel imports and
exports as well as carbon that is used domestically but not emitted to the atmosphere (e.g., carbon that is
embodied in products such as asphalt and plastic).
Application of these criteria suggest that allowances be required at the following points in an upstream
system:
· Petroleum refineries, because coverage of petroleum-related emissions would be nearly total, the number
of regulated entities would be small (175), and the carbon in fuels could be reliably estimated.
· Oil importers, to ensure that refined petroleum products arriving from abroad are captured in the system.
· Natural gas pipelines, because of the high coverage of potential gas-related emissions and the fact that the
population of regulated entities would be kept to approximately 150, if all interstate and major intrastate
pipelines were included.
· Natural gas processing plants, to capture the carbon embodied in natural gas liquids (NGLs).
Approximately 725 gas processing plants are operating in the US.
· Coal mines and preparation plants. Prep plants, of which there are approximately 550, possess the data
needed to estimate potential carbon emissions. However, because not all coal passes through a prep plant, in
some cases regulation would have to take place at the mine. While all mines would be included in the
reporting system, only those producing coal that bypassed prep plants would need to hold allowances. It is
estimated that less than 100 coal mines, located primarily in the western US, would actually have to hold
allowances.
Upstream Better than Downstream – Coverage

( ) A downstream cap and trade would cover less than half as many emissions sources as
an upstream system
2008
Greater Coverage: An upstream system would capture virtually all fossil fuel use and carbon emissions
in the US economy. In contrast, a downstream system would be hard-pressed to cover one-half of total
emissions and would have particular difficulty in capturing emissions from the transportation sector
and other small sources. Leaving some emissions activities outside of the system would be unfair to those
included in the system and would drive up the total cost to the country of complying with a target, because
some lower cost reduction options would fall outside of the regulatory system and therefore not be taken. In
addition, by enabling sources not captured in the system to gain a competitive advantage over those
that were included, low coverage might shift economic activity -- and greenhouse gas emissions -- to
unregulated sources.
Upstream Key – Coverage – With Impact

( ) Downstream permit trading solves virtually none of the climate change advantage and
drives up the economic costs of the system
2008
An upstream system as described here would capture virtually all fossil fuel use and carbon emissions in
the US economy. The only emissions not covered would come from fossil energy used in fuel extraction;
natural gas that went directly from the point of production to the end user and thus escaped the regulatory
system; and unsustainable biomass use. In contrast, a downstream system would likely cover no more than
one-half of total emissions. While requiring allowances and measuring the emissions of electricity
generation units and large industrial establishments would be relatively simple, the same would not be true
for small sources such as automobiles, households and small industry. There are approximately 380,000
industrial establishments in the US, millions of commercial buildings and hundreds of millions of homes and
automobiles. A downstream system that included no more than electric utilities and other large major
stationary sources would cover less than one-half of total US carbon emissions.5
There are numerous significant problems associated with low coverage of total potential emissions.
First, the burden of making all emissions reductions needed to meet the cap would fall solely on sources
captured within the system, leaving activities outside of the system untouched. This would be unfair to the
sources included in the system and would drive up the total cost to the country of complying with a
target, because many low-cost reduction options would fall outside of the regulatory system and therefore
not be taken. Second, low coverage of emissions could undermine the achievement of the environmental
goal of meeting the national emissions target. Because they would not be required to obtain allowances,
sources not captured in the system could gain a competitive advantage over those that were included.
Thus, carbon dioxide emissions to some extent might simply shift to sources outside the system, rather than
being reduced. In this situation, covered sources taken as a whole would meet their targets but overall
US emissions would be above target levels.
Upstream Better than Downstream – Admin

( ) Upstream systems are the only way to make cap-and-trade administratively feasible
2008
Administrative feasibility. An upstream system would include fewer industries and regulated entities
than a comprehensive downstream system. It probably would include less than 2,000 reporting entities,
meaning that the costs to the government of establishing an infrastructure for the reporting and
verification of emissions data would be relatively low. Total costs to industry of reporting also would be
low. Essentially, an upstream system would provide a simple means of capturing the carbon emissions
from the millions of small sources in the transport, commercial and residential sectors.
Upstream Key to Solve Climate

( ) An upstream cap-and-trade system is key to solve climate change and mitigate costs to
businesses
20, 2008
The environmental effectiveness of a domestic cap-and-trade system for climate change can be
maximized and its costs and risks minimized by inclusion of several specific features. The system
should target all fossil fuel-related CO2 emissions through an economy-wide cap on those emissions.
The cap should be imposed “upstream,” that is, on fossil fuels at the point of extraction, processing, or
distribution, not at the point of combustion. The system should set a trajectory of caps over time that
begin modestly and gradually become more stringent, establishing a long-run price signal to encourage
investment in emission-reducing technology. It should adopt mechanisms to protect against cost uncertainty.
And it should include linkages with the climate policy actions of other countries. Importantly, by providing
politicians with the option to mitigate economic impacts through the distribution of emissions
allowances, this approach can establish consensus for a policy that achieves meaningful reductions. It is
for these reasons and others that cap-and-trade systems have been used increasingly in the United States
to address an array of environmental problems, for example to phase out the use of lead in gasoline, limit
emissions of sulfur dioxide (SO2) and nitrous oxides (NOX), and phase out chlorofluorocarbons (CFCs;
Stavins 2003; see also the online appendix at www.hamiltonproject.org).
Upstream Key to Feasibility

( ) Downstream regulation doesn’t solve and imposes far higher administrative costs and
economic harm
20, 2008
The point-of-regulation decision is a primary determinant of a cap-and-trade system’s administrative
costs through its effect on the number of sources that must be regulated. As that number increases, the
administrative costs to regulators and firms rise. The point of regulation should be chosen to facilitate
regulation and minimize the administrative costs of a desired scope of coverage.27 An upstream point of
regulation makes an economy- wide cap-and-trade system administratively feasible: nearly all U.S. CO2
emissions could be capped with regulation of just 2,000 upstream entities (Bluestein 2005). It would be
administratively infeasible to implement an economy-wide cap-andtrade (or carbon tax) system through
downstream regulation, as this would require regulation of hundreds of millions of commercial
establishments, homes, and vehicles. An upstream program also eliminates the regulatory need for facility-
level greenhouse gas emissions inventories, which would be essential for monitoring and enforcing a
downstream cap-and-trade system. The fossil fuel sales of the 2,000 entities to be regulated under the
upstream cap-and-trade system are already monitored and reported to the government for tax and
other purposes (Table 2). Because monitoring is of little use without enforcement, meaningful and credible
penalties are also important, such as fees set at up to ten times marginal abatement costs, plus the requirement
for firms to make up the difference. Such provisions have resulted in virtually 100 percent compliance in the
case of the SO2 allowance trading program (Stavins 1998).
Downstream Fails – Monitoring/Efficiency

Downstream fails – Hard to monitor and inefficient
Both a carbon tax and a cap and trade system could be imposed either “upstream” or “downstream.” As Part
III discusses in greater detail below, an upstream carbon tax or cap and trade system would focus on fossil
fuel production (oil, coal, and natural gas), since together energy use accounts for approximately eighty
percent of carbon dioxide emissions in the United States. An upstream market-based approach would have
the greatest ability to ensure that all sources of carbon dioxide emissions were affected, because it focuses on
carbon at the point that it enters the economy. Alternatively, either a carbon tax or a cap and trade system
could be imposed downstream on the facilities that are the major sources of carbon dioxide emissions. A
downstream approach would focus on the same facilities that would likely be regulated under state
implementation plans (if carbon dioxide became a criteria pollutant) or under Title V permits. A well-
designed downstream approach also could reach all sectors of the economy and, if so, would enable costs to
be distributed as evenly as an upstream approach. The challenge under a downstream approach, however,
is the number and kinds of facilities that would be monitored and the inherent difficulty in reaching all
forms of energy use, most notably motor vehicle use and electricity, which contribute significantly to
carbon dioxide emissions. The broader range of facilities to be monitored would heighten the
administrative complexity; the increased number of facilities would require greater resources for
compliance assurance and enforcement. In addition, it is not clear how energy use by individuals would
be addressed, despite their significant contribution to the carbon dioxide emission problem. For these
reasons, an upstream approach makes more sense for either a carbon tax or a cap and trade system,
perhaps with a more targeted approach to polluting facilities and motor vehicles coming over time through
regulation under the Clean Air Act.
AT: Upstream Fails/Downstream Better

( ) Their solvency args about upstream systems are wrong and apply more to downstream
systems
20, 2008
Some confusion has emerged regarding these points, with some observers suggesting that an upstream
program will dilute the carbon price signal, because only part of the allowance costs will be passed
through to downstream emitters. In particular, higher fuel prices will reduce demand, leading producers to
moderate their price increases and absorb some of the allowance costs themselves. This argument is valid
but not unique to upstream systems. With a downstream point of regulation, fossil fuel would in effect
become more expensive, because emissions sources would be required to surrender valuable allowances.
This would reduce their demand and lead to the same offsetting effect on fuel prices. Similarly, some
critics find an upstream point of regulation counterintuitive, since it does not control emissions per se.
In fact, an upstream approach gets at the problem more directly: it caps the amount of carbon coming
into the system.
No Cost Difference for Consumers between Up and Downstream

( ) There’s no difference in cost to producers or consumers between upstream and
downstream approaches
20, 2008
Although the point of regulation determines which entities are ultimately required to hold allowances, this
decision can be made independently of the initial allowance allocation decision. The point of regulation does
not dictate or in any way limit who may receive allowances if allowances are distributed for free. The point-
of-regulation decision also has no direct effect on either the costs of emissions reduction or the
distribution of resulting economic burdens.23 A cap has the same impact on the effective cost of fuel
for downstream users regardless of the point of regulation. With upstream regulation, the allowance
cost is included in the fuel price. Since all suppliers face the same additional allowance cost, all will include
it in the prices they set for downstream customers. With downstream regulation, the downstream
customer pays for the allowances and the fuel separately. In either case the downstream customer
ultimately faces the same additional cost associated with emissions from its fuel use.
This has two important implications. First, the distribution of costs between upstream and downstream
firms is unaffected by the point-of-regulation decision. Second, firms and consumers will undertake the
same emissions reduction efforts— and thereby incur the same emissions reduction costs—in either
case, because they face the same carbon price signal.
*Auctioning
Auctions Good – Key to Economy

( ) Auctioning permits is key to the economy – free permits drastically raise the cost of
meeting targets and spike electricity prices
20, 2008
Beyond the distributional consequences of allocation decisions, the choice of whether allowances will be
auctioned or distributed for free can affect the program’s overall cost. Generally speaking, the choice
between auctioning and allocating allowances for free does not influence firms’ production and
emissions reduction decisions.32 Firms face the same emissions cost regardless of the allocation
method. Even when it uses an allowance that it received for free, a firm loses the opportunity to sell that
allowance and thus incurs an opportunity cost.
But the choice to distribute allowances for free can affect a cap’s cost in two ways. First, free distribution
forgoes the collection of auction revenue that could be used to reduce the costs of the existing tax
system or fund other socially beneficial policies. Second, free allocations may affect electricity prices in
regulated cost-of-service electricity markets, thereby affecting the extent to which reduced electricity
demand contributes to limiting emissions cost-effectively.33 Much attention has been given to the
opportunity to use auction revenue to reduce existing distortionary taxes. Taxes on personal and corporate
income discourage desirable economic activity by reducing after-tax income from, and therefore the
incentive for, work and investment. Use of auction revenue to reduce these taxes in a fiscally neutral
fashion would stimulate additional economic activity, offsetting some of the cap’s costs. These tax
reductions could be significant. Studies indicate that “recycling” auction revenue by using it to reduce
personal income tax rates could offset 40 to 50 percent of the economy-wide social costs that a cap would
impose if allowances were distributed for free (Bovenberg and Goulder 2003).
Auctioning is best for the economy- 4 reasons.

Cramton and Kerr, 1998
(Peter, Professor of Economics Economics at the University of Maryland, Suzi, Professor of Agricultural and Resources
Economics at the University of Maryland, Tradable Carbon Permit Auctions: How and Why to Auction Not
Grandfathered, www.rff.org/Documents/RFF-DP-98-34.pdf)
An auction of carbon permits is the best way to achieve carbon caps set by international negotiation to limit
global climate change. To minimize administrative costs, permits would be required at the level of oil
refineries, natural gas pipe lines, liquid sellers, and coal processing plants. To maximize liquidity in
secondary markets, permits would be fully tradable and bankable. The government would conduct quarterly
auctions. A standard ascending-clock auction in which price is gradually raised until there is no excess
demand would provide reliable price discovery. An auction is preferred to grandfathering (giving
polluters permits in proportion to past pollution), because it allows reduced tax distortions, provides more
flexibility in distribution of costs, provides greater incentives for innovation, and reduces the need for
politically contentious arguments over the allocation of rents.
Auctioning Good – Key to Economy

Auction revenues solve economic impacts
There were concerns from ranking committee member Congressman James Sensenbrenner (R-WI) that a
cap-and-trade system is actually just a carbon tax disguised in sheep’s skin. He believes cap and trade
would hurt U.S. job markets, raise prices for consumers, and take money out of an economy already in
recession. Podesta and other panelists were quick to point out that cap and trade would create green
jobs and that relatively small increases in energy costs for consumers can be easily offset by more
efficient energy use.
Since joining the Regional Greenhouse Gas Initiative, a conglomerate of northeastern states who began their
own cap-and-trade system, Massachusetts has seen less than a one percent increase in energy bills, according
to Bowles. Some economists and opponents suggest that higher costs incurred by electric companies will be
passed on to consumers through higher rates. The $50-$300 billion likely raised from an auction could be
reallocated to cushion the impact of increased energy costs for lower-income families. Mr. Greenstein’s
analysis found that only 14 percent of the money would be required to offer assistance to low-income
families and less than 15 percent should be allocated to help offset costs to businesses and shareholders
of affected industries. To allay fears that the auction will pull too much money from the struggling
economy, the panelists suggested stimulus measures using auction proceeds.
Podesta proposed that the government portion auction money into separate accounts, with 10 percent going
to energy-intensive industries to compensate them for increased energy costs. The remaining 90 percent
would be split between protecting vulnerable consumers from higher energy prices, and R&D for alternative
and renewable energy sources. The money would go toward research to spur innovation in energy
technology that will help decrease dependence on foreign oil, find novel ways to reduce emissions, and
stimulate “green job” creation in the U.S economy.
Auctioning Good – Lowers Energy Prices

Auctioning permits will lower rather than raise energy prices. Energy prices are
determined by the cap rather than the initial giveaway price and auctioning allows more
efficient companies to develop.
Advocates of grandfathering tend to fail to point out that, if the permits are given to energy companies,
consumers will still pay the higher energy prices," Cramton and Kerr write. "It is the carbon cap itself that
will determine the price increase. Regardless of whether the government auctions permits or gives
them away for free, the same energy price should be expected. The marginal cost of controlling carbon is not
altered by grandfathering, only the initial ownership of carbon rights. The only difference is that the energy
companies, not the taxpayers, pocket the extra revenue.
The experience in cellular communications provides a vivid illustration. In the 1980s, the FCC gave
away cellular licenses. The companies did not respond to the gift with lower prices. Rather, prices
were high, since only two companies could operate in each market. Now the FCC auctions licenses,
generating billions of dollars for the Treasury. Prices are falling as these auction winners enter the
markets of those who were given licenses.
Auctioning Good- Taxes/Economy

Auction revenue can replace traditional taxes and thus relieve a substantial burden on the economy.
Auction revenue can replace distortionary taxes. Distortionary taxation creates a deadweight loss by
inserting a wedge between marginal cost and price. Any efficient form of carbon regulation must make
carbon scarce, thereby raising the marginal cost of using carbon. The rise in marginal cost implies a real cost
of carbon regulation equivalent to the deadweight loss from distortionary taxation (see Figure 2). This real
welfare cost corresponds to loss of output estimated to be on the order of 0.8 percent of GDP which would
have been $60 billion in 1995 (Repetto and Austin 1997). At the same time, the regulation of carbon creates
scarcity rents on the order of $134 billion. In a grandfathered system, these rents go to those who receive the
permits. In an auction system, the rents are collected as revenue by the government. This revenue
could be used to cut labor, payroll, capital, or consumption taxes or to reduce the deficit, all of which
would create efficiency gains. Some could be used to further equity goals as discussed below. Ballard,
Shoven and Whalley (1985) estimate that each additional $1.00 of government revenue, raised through
distortionary taxation, costs society $1.30. If we can gain revenue with no additional distortion, by
auctioning rather than grandfathering, we can achieve significant efficiency gains. The revenue raised
in the auction could be used to cut taxes and reduce the deficit. One concern commonly expressed by
private sector actors is that government will not use the revenue well. While this may be true, with revenue
of around $134 billion annually Congress will be forced to use the revenue in transparent and hence
probably more socially beneficial ways. If the auction raises $134 billion annually, compensating tax
cuts could increase GNP by up to $40 billion.
Auctioning Good- Innovation

Auction systems pressure existing companies to innovate and reduce their demand for permits as well as
allows newer more efficient companies to develop.
The choice of auctions over grandfathering has dynamic advantages. Innovation reduces costs. This is
always advantageous to firms. Innovation, however, also reduces scarcity rents. Industry incentives to
innovate are even greater with auctions than grandfathering because, when permits are auctioned,
innovators benefit from the innovation- induced fall in permit prices (Milliman and Prince 1989). In a
grandfathered system these rents belong to the industry so there is no gain from reducing them. 6
Another dynamic advantage is that auctions guarantee liquidity and thus ensure the availability of permits to
new entrants and small traders. Some people argue that firms are liquidity constrained and that this limits
innovation and adoption of new technology. This may be a reasonable argument for households buying a
new refrigerator, but is not reasonable for the likely recipients of grandfathered permits, large energy
companies. A tax cut will more effectively provide resources to liquidity-constrained households and small
firms.
Auctions Good – Revenue

Billions of dollars will be generated through auctions
20, 2008
How much revenue would the auctioning of allowances generate under the proposal? If all allowances were
auctioned, potential auction revenue under the less aggressive program would be $119 billion a year in
2015, increasing to $473 billion by 2050; it would range from $269 billion in 2015 to $404 billion in 2050
under the more aggressive policy (Table 10). Revenue rises more slowly under the more aggressive policy
because although allowance prices increase over time, the quantity of allowances auctioned equals the
quantity of capped emissions, which decreases over time. To place these numbers in context, Table 10 also
reports the potential tax reduction per family of four if all auction revenue were used to reduce other taxes.56
Under the less aggressive policy, taxes are potentially reduced by $1,490 per family in 2015, rising to $4,770
in 2050. Under the more aggressive policy, the potential tax reduction increases from $3,360 in 2015 to
$4,260 in 2040 and then decreases to $4,060 in 2050. The reason for the rise and fall is that, again, although
the CO2 emissions price increases consistently throughout the period, the number of allowances to be
auctioned decreases as emissions are brought down. By its construction, the EPPA model as employed in
Paltsev and others (2007a, 2007b) cannot be used to examine quantitatively the cost savings associated with
using auction revenue to cut distortionary taxes, but a related study found—in the case of the more
aggressive cap-and-trade policy—that welfare costs would be reduced by 24 percent if all auction
revenue were used to lower taxes on capital, and by 9 percent if auction revenue were used to cut taxes
on labor (Gurgel et al. 2007).57
Auction Better than Giveaways – Empirics

Auctions are cheap and efficient – Europe empirically proves
A cap-and-trade system would require an initial scheme to allocate permits to carbon dioxide emitters
who would then go on to buy and sell the permits to meet reduction standards. The European Union
introduced a cap-and-trade system in 2005 but handed out allocations freely to pollution emitters. As
Mr. Zapfel pointed out, the allocation scheme was complex, lacked transparency, suffered from constant
rule changes that distorted decision making, and was unfair to some energy sectors. He also noted that
European energy producers passed on the cost of lowering emissions to consumers, leading to “windfall”
profits throughout the industry. These hard lessons led to a change in EU policy that will terminate free
allocations by 2012 and make way for an auction scheme by 2020. An auction system will allow for
greater simplicity, transparency, and efficiency. As Burtraw and Bowles pointed out, an auction scheme
would be relatively simple for the United States, as the Federal Communications Commission has been
auctioning broadcasting licenses for years, and electricity companies already bid on electricity on a
daily basis.
100% Auction Good

( ) 100% auction of carbon permits is key to solving warming and boosting the economy
The right to pollute should not be given away for free,” said House Select Committee on Energy
Independence and Global Warming Chairman Edward Markey (D-MA), setting the tone for a hearing held
Wednesday on cap-and-trade emissions policies. Experts assembled to discuss the environmental and
economic implications of auctioning pollution allowances. The panelists concluded that a 100 percent
auction of pollution permits would not only stimulate the economy by fostering the “green” job market
but would also raise money to help offset higher energy prices for vulnerable consumers and fund
R&D in alternative energy sources and technology.
The panelists echoed Chairman Markey’s sentiments, testifying that an auction scheme would best serve
the needs of U. S. citizens, and create tangible reductions in carbon emissions. The committee heard
testimony from Center for American Progress President and CEO John Podesta; Ian Bowles, Secretary of
Energy and Environmental Affairs for Massachusetts; Dallas Burtraw, Senior Fellow at Resources for the
Future; and Robert Greenstein, Executive Director for the Center on Budget Policies and Priorities. Peter
Zapfel, Coordinator for Carbon Markets and Energy Policy for the European Commission, traveled from
across the pond to discuss the lessons learned by the European Union’s own cap-and-trade system.
100% Auction Good

100% auctions avoid windfall profits
Requiring emitters to buy 100 percent of their carbon credits will avoid windfall profits for polluting
industries. Ensuring that the number of carbon credits available in the marketplace is linked to a strict
emissions cap will help avoid carbon permit price volatility and achieve real emission reductions. And,
once the United States enacts its own carbon cap, our cap-and-trade marketplace will integrate more fully
into the emerging global marketplace, providing much more liquidity and allowing our highly competitive
derivatives exchanges to deploy their proven trading prowess in a new and critical global marketplace for
carbon credits.
A2: Auctioning Bad – Costs

Auctioning permits does not force significant extra costs onto industries, it was only after
the concept of grandfathering became popular that arguments against auctioning began to
emerge.
Vol. 14, No. 3)
Some issues are more problematic. Although some critics have attacked the practice of allocating allowances
based on a firm’s history of emissions, the challenge has not been significant. By precedent, the assumption
is that the status quo should be used as a baseline, with facilities initially having the right to emit
whatever they have been emitting in the past. This assumption is generally consistent with the allocation
of water rights in western states. In effect, the policy implies that firms have been putting a resource—
whether it is water or the right to emit a contaminant—to produc¬tive purposes, and therefore deserved to
inherit those rights. However, on equity grounds, economists and others have criticized trading programs for
this “free” distribution of emissions allowances to ex¬isting facilities, while new facilities must purchase all
their allow¬ances from the market. Alternative strategies certainly exist. For example, emissions trading
programs could be designed to require that all allowances be purchased from the market. Or regulators could
require firms to pay a fee for each allowance used. Currently, firms already pay a fee proportional to the size
of their emissions when submitting an application for an air permit, with that fee covering the administrative
expenses associated with permitting. In any case, the issue did not present itself when the first decisions
concerning the right to emit contaminants were made in the 1970s. Only after participants gained
experience in program design and implementation, such as with the acid rain program, did such issues
come to the fore.
A2: Auctioning Bad- Monopoly

The carbon market is far too large to allow monopolies to emerge.
It is inconceivable that any party would be successful in exercising substantial market power in the
market for carbon permits. Even the largest bidder (Peabody Holdings with 5.6 percent of the market)
can gain little by understating demand. Attempts to corner the market to exclude competitors would
be even more fool hardy. It would be impossible for a single firm to prevent competitors from buying
permits at auction or in an active secondary market for carbon permits. None of the conditions that
allow for market failure are present here.
Grandfathering Bad/Auctioning Good

Auctioning emissions credits should be preferred to grandfathering them for four reasons
Corporate Welfare,” Redefining Progress
Unfortunately, history suggests that the government is more likely to give away emissions permits
instead of auctioning them to emitters. However, auctions are a better idea, for several reasons: 1.
Giving away the rights to emit carbon would be a national gift given only to a few private corporations.
Meanwhile American taxpayers, consumers, and businesses that did not receive free permits would end up
footing the entire bill for carbon dioxide reductions. This amounts to a massive corporate welfare policy.
The atmosphere is a common asset, and its benefits should not be given away. 2. Giving away permits
would be fraught with interest group politics, where industries would lobby furiously to obtain the
maximum number of permits possible. This makes the whole emissions reduction program less efficient.
In fact, the high cost of lobbying for permits actually led to industry support for auctioning the
telecommunication spectrum for portable phones, pagers, and other wireless communication devices. When
the FCC compared the costs of auctioning to the cost of previous lotteries for spectrum allocations,
they estimated that “free” (lottery) permits were six times more costly than the auctioned permits, once
filing costs, government administration costs, and public losses from delayed services were calculated. 3.
Auctioning greenhouse gas emission permits would create a revenue source that policymakers could
use for tax cuts or direct payments to consumers, businesses, and taxpayers. This “revenue recycling”
would make the permitting system, and possibly the tax system, more equitable and more efficient. 4. If the
polluters are not charged for emissions, it will imply that citizens do not have a property rights claim to
a clean environment. A giveaway policy would send the message that the atmosphere is “owned” by
polluting firms. When the U.S. chooses to limit carbon dioxide emissions, we should ensure that
emitters compensate the rest of society for the valuable right to use the atmosphere for carbon dioxide
emissions. In previous papers, Redefining Progress has argued the case for revenue recycling—that is, using
carbon taxes or auctioned emissions permits to raise revenue that can be recycled back to the economy
through other tax cuts, direct rebates, or assistance to those population segments hit hardest by increased
energy prices. This is the most equitable way to use market forces to drive climate change mitigation.
Auctioning emissions credits is better for the US economy- and even helps businesses more
than if no carbon cap had been put in place.
Corporate Welfare,” Redefining Progress)
A permit giveaway would be a boon to the coal mining industry (1,005% increase) and the oil and gas
industry (29% increase), while the equity values in most other industries would decline. The profits these
companies generate from their free pollution permits would directly benefit only stockholders in these
companies. Most Americans would only receive higher prices in return. Electric utilities, which buy the
energy produced by fossil fuel extractions, would suffer the most (-5.7%). On the other hand, under a
system of permit auctions coupled with targeted tax cuts, the electric utility, construction, auto, service,
and housing industries would do better relative to the giveaway scenario. In some cases, they would do
better than if there were no climate policy at all. In this situation, prices would still increase by the market
price of permits, but the revenue raised from the permit auctions or fees could then be used for various
environmental or economic purposes. These might include rebates to citizens facing higher energy
prices; mitigating climate change’s impacts on the most vulnerable groups; or tax shifts that reduce
personal, payroll, or business investment taxes. Auctions would provide a benefit to society as a whole
in exchange for letting corporations use the atmosphere, while grandfathering would benefit only the
corporations who hold the permits.
A2: Grandfathering Good- Economy

Grandfathering only helps the already rice CEO’s of mayor energy companies, not the rest
of the economy.
In contrast, grandfathering permits does not yield efficiency benefits so total costs are higher. It
redistributes wealth only to those who directly receive permits. If the government grants permits to coal
companies, electric utilities, and their ilk, it will yield no benefits for workers in those industries, local
economies or consumer prices. Grandfathering could compensate some current owners of specific
capital if permit allocations are carefully targeted. These owners, however, can be adequately and
more efficiently compensated, if such compensation is thought necessary, through targeted tax breaks.
It would be theoretically possible to grandfather the permits to a wide range of workers, consumers and
capital owners, but this would be a cumbersome way to achieve a less efficient result than a tax-cut auction.
Equity can be better achieved under auctions. Cost bearing is widely spread, and, in the long run, all
costs are borne by consumers. Therefore compensation should also be more widely spread. Auctions can
provide more flexibility than grandfathering in compensation. In addition, poorer people tend to be
workers and consumers more than they are shareholders, so they are unlikely to benefit from
grandfathering. These arguments were also true for the Acid Rain program, where grandfathering was
chosen, but as Joskow and Schmalensee(1997) point out, the effects were attenuated because the recipients of
permits were electric utilities.
A2: Grandfathering Good/Auctioning Bad- Economy

There is no price difference of energy between grandfathering and auctioning- there’s only
a risk that the funds raised from auctioning can ameliorate the consequences of a cap and
trade system.
Barrett, Executive Director of Redefining Progress and Ph.D. in Economics, 2006
(James P., Arguments for Auctioning Carbon Permits,” http://www.e3network.org/Barrett_11.pdf.)
Because energy is a critical input to economic activity, increased energy prices will tend to slow economic
growth. Given that the immediate impact on energy prices and the initial direct impact on economic
growth of a cap and trade system is identical regardless of how the permits are distributed, the
economic question is now the ultimate disposition of the burden of the price increase, and how much of
the reduction in economic growth can be ameliorated.
Under grandfathering, polluters receive a lump-sum distribution of valuable assets. This represents a
pure lumpsum wealth transfer from energy consumers to energy producers. There is no incentive
attached to this transfer, and thus produces little or no change in marginal behavior; i.e. it neither
increases nor decreases the incentives for economic activity. The direct cost of the cap and trade system via
increased energy prices will be the whole economic story.1 With auctioning, however, the government will
collect the revenues and can put them to economically productive use. Here, the term “economically
productive” means a use that changes the marginal incentives for economic activity. Two commonly cited
examples are reducing existing taxes and investment in energy efficiency. Since taxes discourage economic
behavior, reducing taxes increases economic behavior. A simple example is the payroll tax, or FICA,
which is collected to fund Social Security and Medicare. Because it lowers the economic returns to working,
it discourages some work on the margin. Because it increases the cost hiring, it also discourages employers
from hiring. Though the magnitude of the effect is uncertain, there is no doubt that reducing the federal
payroll tax would increase employment. Using permit auction revenues would thus increase employment
and economic growth beyond what they would be under a grandfathered system. Whether or not the
resulting increase in economic activity would be enough to offset the direct economic costs of the system is
also uncertain.
A2: Grandfathering Decreases Energy Prices

Price is set by marginal cost- grandfathering just resorts in companies pocketing the excess
profits while auctioning transfers the revenue to the consumer.
Barrett, Executive Director of Redefining Progress and Ph.D. in Economics, 2006
(James P., Arguments for Auctioning Carbon Permits,” http://www.e3network.org/Barrett_11.pdf.)
There appears to be much misunderstanding about the implications of grandfathering vs auctioning
permits, with many claiming that grandfathering or other free allocation systems will not have the
same impacts on energy prices as auctioning. This is incorrect. Imagine the following situation: Last
year, the U.S. emitted 100 tons of CO 2 , and this year, it will restrict it's emissions to 90 tons via a cap and
trade system. There appears to be no disagreement that selling the permits to emitters will cause energy
prices to rise: As the price of production rises, producers will pass some or all of those increased costs onto
their customers. To see that this is identically true under free allocations, assume that the permits are
allocated for free, and consider the decision that must be made by a producer who did not receive enough
free permits to cover all of the pollution he or she would have otherwise emitted. She must either: 1) Buy a
permit from another polluter in the secondary market; 2) Undertake costly abatement activity (e.g. increasing
conversion efficiency at an electricity plant). Under either option, her costs per unit will rise. If she is going
to sell the units she produced without losing money, she will have to raise the price of her output. Because
prices are set at the margin, i.e. the price of the last unit sold in a market is the price that all units sold
receive, the price of all output from all producers will increase by the same amount. The result is that
the even those producers who received free permit allocations will price their output exactly as if they
had to pay for the permits. A third option for our unlucky producer is to cut output. If she believes that she
can not increase her selling price enough to cover the cost so of either option 1 or 2 above, then she will have
to cut output to reduce her pollution enough to fit under the cap. Like any other reduction in supply, this will
cause prices to rise. Again, because all units will sell for the same price, this price increase will accrue to
units sold with the benefit of free allocations. In all three cases, producers who receive free permits will price
their output exactly as if they had received no free permits.
***AT: Disads
AT: Elections
( ) Both candidates support cap and trade – there’s no way the plan could give one the
edge
IHT (International Herald Tribune), 6-18, 2008, “Europe’s carbon market holds lessons for the U.S.”
As the United States moves toward action on global warming, practical experience with carbon markets in
the European Union raises a critical question: Will such systems ever work?
Backers of carbon markets, including the presumptive U.S. presidential candidates Barack Obama and
John McCain, see them as one of the cheapest and most effective ways to control greenhouse gases in
advanced economies.
AT: Natural Gas DA

Turn - Demand for natural gas actually increases
20, 2008
Assessments of impacts on the natural gas industry are complicated by changing conditions in natural
gas markets. The increased cost of natural gas use under a cap-and-trade system tends to reduce the
quantity of natural gas demanded, but demand may increase because natural gas is the least carbon-
intensive fossil fuel, leading users to switch to it. However, as the price of natural gas has increased
considerably in recent years, so, too, has the cost of achieving emissions reductions through fuel switching.
The cost of natural gas for electric power generation was little more than twice that of an equivalent amount
of coal (on an energy content basis) in 1999 but rose to more than five times the cost of coal in 2005 (U.S.
Energy Information Administration 2007).
AT: Hotspots of Pollution

GHGs mix meaning no hotspots
20, 2008
“Cap-and-Trade Creates Hot Spots of Pollution.” Because greenhouse emissions uniformly mix in the
atmosphere, there are no greenhouse gas hot spots. The question is whether allowance trading activity
might lead to excessive concentrations of other, localized pollutants whose emissions are correlated
with greenhouse gas emissions. This concern has frequently been expressed in California’s debate over a
proposed cap-and-trade system for greenhouse gases. A cap-and-trade system for greenhouse gases, however,
would not supplant existing local air quality regulations. If a firm’s action resulting from an emissions trade
violates local regulations for NOX emissions, for example, that action would still be illegal no matter how
many greenhouse gas allowances the firm obtained. A greenhouse gas cap-andtrade system would not
interfere with local air quality regulations; only legal trades would be legal.
***AT: Counterplans
*AT: States
States Don’t Solve – Balkanization

States approach emission reductions differently – a uniform approach is key
Finally, while leaving regulation to the states has benefits in many other contexts, it is far less clear that
state regulation is the best approach to a problem of national and international scope. To date, much of
the climate change effort has occurred at the state and local levels,96 and those efforts are laudable,
particularly in the absence of federal action during the Bush Administration. But experience tells us that
the states vary widely in their approach to environmental regulation, to include the scope of their Title V
permitting programs under the Clean Air Act. As a result, while a permitting program may be a helpful
additional step to combat climate change, it is unlikely to be a strong enough measure to achieve the
necessary level of overall emissions reductions in the United States.
State-by-state approach leads to fragmentation between states

217
State regulators in the United States are currently concerned that increased GHGs in the atmosphere
are changing the climate of the earth and causing accelerated global warming.52 In the absence of a
federal mechanism, states are beginning to independently examine the possibility of implementing
localized cap-and-trade programs. Recent developments in the regulation of CO2 emissions are driven
by the perceived need of state regulators to address climate change in the absence of a national policy
and by the fact that voluntary actions taken by companies are deemed inadequate.53 However, a state-
by-state approach to regulation can lead to Balkanization with no integration or harmonization of
various programs. Generally, Balkanization creates “trade barriers so high between the states that the
stream of interstate commerce cannot flow over them.”54 While many states have issued policy
initiatives,55 this Note considers only those regulations that states are close to implementing.
Federal action key to solving balkanization

221-222
From a policy perspective, a suggested alternative to resolve the Balkanization of state programs for
CO2 mitigation programs would be a national CO2 cap-and-trade program. Otherwise, state-enacted
programs will interfere with the interstate transmission of electricity, as further discussed in Part IV.
Balkanization of state programs is a setback both to existing and evolving electricity markets, potentially
undermining service reliability for customers. With a national approach, cap-andtrade programs would
grant allowances to renewable energy generators, or emissions caps would be set at lower levels when
taking into account Renewable Portfolio Standard programs.75 Such program coordination would
ensure that a power generator is not registered in or issued allowances from more than one tracking
system, thus improving the integrity of markets. In any event, clear policies are needed to provide
regulatory certainty, as a lack of uniformity in markets will bar expansion of markets. This lack of
expansion will result in fragmented markets that do not work as intended.76 Still, in the absence of any
national regulation to implement the Kyoto Protocol requirements or any other national policies to address
GHGs in the United States, states are likely to continue to pass regulations and issue policy proclamations to
reduce emissions of CO2 due to concerns about climate change.77
States Don’t Solve – Long Term Budget Problems

( ) State-level action is insufficient to solve climate change
The Pew Center on Global Climate Change, an independent, non-profit, non-partisan organization, December
2007, “Learning from State Action on Climate Change,” online:
http://pewclimate.org/docUploads/States%20Brief%20Template%20_November%202007_.pdf, accessed June 19,
2008
It is important to understand that states have limited resources to devote to the climate issue, and their
strict budget requirements can put long-term climate policies in jeopardy. States also lack certain
powers that would be crucial to a comprehensive climate change policy, such as the authority to enter
into international agreements. Finally, when states take individual approaches to an issue, a “patchwork
quilt” of policies can result across the nation. This patchwork of policies may be inefficient for
complying businesses and may result in some states duplicating the work done in other states. While
some states are delivering real reductions of GHG emissions, only in a few cases are the reductions
commensurate with what will be needed on a global scale. Ultimately, climate change is a global
problem that will demand global action, including national action in the United States. State and
regional action cannot substitute for a coordinated national response, but it can help provide the
foundation for that response.
States Don’t Solve – International Harmonization

( ) Only federal cap-and-trade systems create synergy with international emissions trading
programs
20, 2008
Offsets would be made available for both underground and biological carbon sequestration, to achieve short-
term cost-effectiveness and create long-term incentives for appropriate technological change. The cap-and-
trade system would be a federal program, with supremacy over all U.S. regional, state, and local
systems, to avoid duplication, double counting, and conflicting requirements. It would also provide for
harmonization over time with emissions reduction credit and cap-and-trade systems in other nations,
as well as related international systems.
State Cap and Trade Gets Struck Down – General

( ) State efforts to address climate change will be ruled unconstitutional and struck down
– federal action avoids
235-236
While this Note does not address the merits of the science behind climate change, most state regulators
appear to be convinced that global warming must be addressed and that action on a local level is required to
address it. In the absence of a national policy to implement the Kyoto Protocol requirements in the United
States or to regulate CO2 emissions independently, states concerned with the serious implications of
climate change will most likely continue the growing trend of passing regulations and issuing policy
proclamations to reduce emissions of CO2. However, a state-level approach to regulating CO2 emissions
via cap-and-trade programs in the electric power sector is unconstitutional because it places an undue
burden on interstate commerce. Furthermore, state efforts to regulate CO2 may violate the Supremacy
Clause, due to field preemption. Lastly, there is a potential problem posed by preemption via an
impermissible conflict with federal foreign policy towards climate change. A national approach by
Congress will not only reduce emissions of CO2 and have more of a practical impact in reducing
GHGs, it will avoid the constitutional infirmities of state-level programs.137
State cap and trade programs are unconstitutional

207-208
This Note argues that while states have laudable reasons for addressing climate change concerns by
attempting to regulate GHGs, such efforts are invalid in the face of fundamental constitutional
considerations. Any state or regional cap-and-trade program faces three different challenges. First, by
their very nature, state-level CO2 cap-and-trade programs as applied to the electric power sector create
an undue burden on interstate commerce and discriminate against out-of-state commerce. States will
be unable to establish a cap-and-trade program that is the least restrictive alternative to reducing
emissions of GHGs, because while CO2 is emitted from a number of different sectors, cap-and-trade
programs tend to isolate a particular sector such as electric power generation. Scientific uncertainty regarding
the causes of global warming will also make it difficult for a state to establish that there will in fact be a local
benefit to regulating CO2 emissions.12 Secondly, state-level cap-and-trade programs face a hurdle in the
Supremacy Clause, which preempts any such programs because Congress intended to comprehensively
occupy the field of regulation of CO2 emissions. Third, state cap-andtrade programs can be viewed as
interfering with the federal government’s power to regulate commerce with foreign nations, thus
violating the Foreign Affairs Clause. These three constitutional concerns mean that any such state or
local programs will be challenged and almost certainly struck down before they are even implemented.
As such, any climate change policy to reduce GHGs must apply at the national level in order to avoid
constitutional barriers.13
State Cap and Trade Gets Struck Down – Supremacy Clause

State cap and trade programs are unconsitututional in regards to the Supremacy Clause
233
The above three arguments indicate that with respect to a state-level CO2 cap-and-trade program
imposed on the electric power sector, Congress intended to comprehensively occupy the field of
regulation of CO2 emissions and preempt any state-level approaches. Congress most likely intends
either FERC or the US EPA to occupy the field of GHG regulation, or Congress intends, at least for the
present moment, a voluntary marketbased approach towards reduction of GHGs. Thus, through field
preemption, such state-implemented cap-and-trade programs are unconstitutional as violative of the
Supremacy Clause.
State Cap and Trade Gets Struck Down – Foreign Affairs

( ) State cap and trade programs will be struck down for interfering in foreign affairs
233-235
The foreign affairs power arises from the President’s fundamental executive powers and from certain
powers granted to Congress such as the power to regulate commerce with foreign nations.126 While
the Constitution “expressly grants Congress, not the President, the power to ‘regulate Commerce with
foreign Nations,’” the President has the “lead role” in the field of foreign policy.127 Federal foreign
policy has a strong preemptive effect on state action.128 Indeed, “[t]he exercise of the federal executive
authority means that state law must give way where . . . there is evidence of clear conflict between the
policies adopted by the two.”129 The U.S. recently joined with five Asian nations in a technology-based
partnership to reduce GHG emissions causing global warming.130 The partnership promotes technologies
including energy efficiency, clean coal, liquefied natural gas, bioenergy, methane capture, nuclear power,
geothermal, and wind and solar energy.131 This partnership fits into the Bush administration’s advocacy for
voluntary measures and the development of clean, lower emitting technologies to reduce GHGs.132 The
partnership also contrasts sharply with the mandatory measures favored in the Kyoto Protocol, which the
Bush administration refused to ratify.133 Additionally, the partnership is a market-based approach eschewing
any mandatory CO2 reduction measures that would result from a state-imposed CO2 cap-and-trade program.
The partnership is market-based in the sense that entities will reduce their exposure to climate change
because it may have an impact on their stock price, by choosing to promote those technologies that lower
emissions of GHGs in the most cost-effective strategy that fits their particular position.134 Thus, the
president has arguably designated a specific foreign policy on climate change. By contrast, state-level CO2
cap-and-trade programs represent a mandatory approach to CO2 regulation that has been consistently
rejected by both present and past administrations.135 State programs attempting to impose CO2 cap-
and-trade programs may thus very well interfere with the federal government’s policy for the present
moment on climate change. State-level CO2 cap-and-trade programs will most likely “stand as an
obstacle to the accomplishment and execution of the full purposes and objectives” of the current
administration’s policy towards climate change, and thus impermissibly conflict with federal foreign
policy so as to be preempted by federal law.136 While the Foreign Affairs argument appears to be
weaker than the Commerce and Supremacy Clause arguments, it is one more constitutional hurdle
that cap-and-trade programs will have to overcome.
State Cap and Trade Gets Struck Down – Commerce Clause

State cap and trade is unconstitutional – commerce clause
224
Interstate commerce is commercial intercourse “among” two or more states, and excludes such activity
that occurs solely within the borders of one state.86 As Justice Blackmun pointed out, “it is difficult to
conceive of a more basic element of interstate commerce than electric energy, a product used in
virtually every home and every commercial or manufacturing facility.”87 Further, “a state cannot
block imports from other states, nor exports from within its boundaries, without offending the
Constitution.”88 State regulations involving a CO2 cap-andtrade program would necessarily limit the
amount of electricity produced from coal-fired generation imported into the state, and as such
discriminate against interstate commerce. Even assuming that states are effectuating a legitimate
government purpose by discriminating, the discrimination would be unconstitutional because of the
many less restrictive alternatives to a state cap-and-trade program, such as carbon adders.89
Federal Cap and Trade Supercedes States

( ) Federal cap and trade key to avoid duplication, double-counting, and conflicting
requirements
20, 2008
In the absence of a national climate policy, ten northeastern states have planned a downstream cap-
and-trade system among electric power generators in the RGGI program (described above), and
California is considering implementing a cap-and- trade program at the state level. The economy- wide,
national, upstream cap-and-trade system proposed here could take the place of any regional, state, and
local systems so as to avoid duplication, double counting, and conflicting requirements (Stavins 2007).
It is likely that a decision will be reached on a national cap-and-trade system before any of the regional or
state programs have actually been implemented.
Federal Government Will Supercede State Efforts

State cap and trade will be nullified due to conflicting with federal law
229-231
The Supremacy Clause invalidates state laws that “interfere with, or are contrary to” federal law.107
Federal law can supersede state laws in several ways. First, express preemption occurs when Congress
preempts state law by so stating in express terms.108 Second, “[e]ven where Congress has not completely
displaced state regulation in a specific area, state law is nullified to the extent that it actually conflicts
with federal law.”109 A conflict occurs where “compliance with both federal and state regulations is a
physical impossibility.”110 Lastly, preemption of all state law in a particular field “may be inferred where
the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that
Congress ‘left no room’ for supplementary state regulation.”111 Congress has not expressly stated that
states cannot enact cap-and-trade programs. Additionally, since Congress has not elected to regulate GHG
emissions, nothing in a state CO2 capand- trade program would directly conflict with a federal law.
Accordingly, if state programs are preempted under the Supremacy Clause, it is through field preemption.
With respect to a state-level CO2 cap-and-trade program imposed on the electric power sector, there are three
arguments that Congress intended to occupy the field of regulation of CO2 emissions. First, under the
Federal Power Act, the Federal Energy Regulatory Commission (FERC) has been given the exclusive
authority to regulate the transmission and wholesale of electric energy in interstate commerce.112 State
regulations involving a CO2 cap-and-trade program would, as illustrated above, impact the transmission and
sale of electricity, thereby invading FERC’s exclusive jurisdiction over interstate energy markets.113 Indeed,
the FERC regulatory scheme following from this authority includes regional transmission organization rules,
open access transmission rules, generator interconnection rules, nondiscrimination rules (in particular the
filed-rate doctrine that applies to the approval of interstate contracts), and the new electricity reliability
jurisdiction of FERC, as provided for in the Energy Policy Act of 2005.114 In Hillsborough County v.
Automated Medical Laboratories, the Supreme Court held that [i]n the absence of express preemptive
language, Congress’ intent to pre-empt all state law in a particular area may be inferred where the scheme of
federal regulation is sufficiently comprehensive to make reasonable the inference that Congress “left no
room” for supplementary state regulation. Preemption of a whole field also will be inferred where the field is
one in which “the federal interest is so dominant that the federal system will be assumed to preclude
enforcement of state laws on the same subject.”115 Because FERC’s regulation in the area of interstate
transmission and wholesale of electric energy is broad and complex, the logical inference is that Congress
intended FERC to occupy the field of any regulations relating to GHGs in the electric power sector.
*AT: Carbon Tax

Cap and Trade Better than Carbon Tax – Climate Change

( ) Carbon taxes are vastly inferior to cap-and-trade in solving climate change
2008
It would be possible to get at uncapped sources through other regulatory means such as carbon taxes and
efficiency standards. This approach is sub-optimal, however. First, it would be administratively
burdensome by virtue of the fact that it would require the establishment of additional programs.
Second, it would not eliminate the problem of distortions between capped and uncapped sources. The
costs imposed by standards and other means may differ from the price of allowances in the cap-and-trade
system, meaning that capped and uncapped sources would feel disparate cost burdens. Fuel market
distortions thus would result, and uncapped sources might enjoy a price advantage over capped
sources (or vice versa). Third, if the government were to overestimate the GHG impacts of the carbon
taxes or efficiency standards used to address uncapped sources, then the country might fall short of its
emissions target. A major advantage of broad coverage is that the environmental outcome is known with
certainty, assuming compliance with the program. Finally, the imposition of taxes is probably politically
untenable.
Carbon tax doesn’t guarantee reaching emissions target

20, 2008
Unlike a cap-and-trade system, a carbon tax does not guarantee achievement of a given emissions
target. Individual sources reduce emissions up to the point where it costs less to pay the tax than to
reduce emissions further. Given uncertainty regarding emissions reduction costs, that point may lie above
or below the policy target. However, because a tax limits the costs that firms will incur to achieve further
reductions, it provides greater certainty regarding the marginal costs of the policy. By contrast, a cap-
and-trade system that establishes rigid annual caps offers less certainty about policy costs precisely
because it provides greater certainty about emissions.
Carbon Tax Bad - Economy

Taxe incur abatement AND tax payment costs
20, 2008
Second, in their simplest forms (a carbon tax without revenue recycling, and a cap-and-trade system without
auctions), a carbon tax is more costly than a cap-and-trade system to the regulated sector, because
firms subject to a tax incur both abatement costs and the cost of tax payments. Under the simplest cap-
and-trade system, the regulated sector experiences only abatement costs, since the transfers associated
with purchase and sale of allowances remain within the private sector. This straightforward difference
between the two approaches can be diminished or even eliminated, however, if either tax revenue recycling
or allowance auctioning is adopted.
Carbon Tax Bad - Competitiveness

Cap and trade avoids battles over exemptions and distributional issues
20, 2008
Third, cap-and-trade approaches leave the distributional issues up to politicians and provide a
straightforward means to compensate burdened sectors and address so-called competitiveness
concerns. Of course, the compensation associated with free distribution of allowances based on historical
activity can be mimicked under a tax regime, but it is legislatively more complex. The cap-and-trade
approach avoids likely battles over tax exemptions among vulnerable industries and sectors that would
drive up the program’s costs, as more and more sources are exempted from the program at the expense
of environmental effectiveness. Instead a capand- trade system leads to battles over the allowance
allocation, but these neither raise overall cost nor affect the climate impacts. Some observers seem to
worry about the propensity of the political process under a cap-and-trade system to compensate sectors
(through free allowance allocations) that successfully claim unfair burdens. But a carbon tax is sensitive to
the same pressures and may be expected to succumb in ways that are ultimately more dangerous.
Cap and Trade Solves Net Benefits to Carbon Tax

Cap and trade captures all the advantages of taxes while avoiding disadvantages
20, 2008
Fourth, as already noted, a carbon tax provides greater certainty over costs at the expense of much less
certainty about emissions levels. Most climate policy proposals call for progressively greater cuts in
emissions over time. Cap-and-trade is fundamentally well suited to this because it is a quantity- based
approach. Progress under a carbon tax would be uncertain, mainly because of variations in economic
conditions. More broadly, the flexibility of cap-and-trade means that it can replicate virtually all of the
key aspects of a tax, for example by auctioning allowances and adopting a cost containment mechanism.
No Politics Link Differential Between Cap-and-Trade and Tax

( ) Political controversy for and against both cap-and-trade and a carbon tax would be
equal
The main opposition to the carbon tax is likely to come not from ordinary voters, but from organized
groups that stand to benefit from cap and trade. These include industry groups that can easily reduce their
emissions and can therefore expect to derive income from selling excess allowances (which they envisage
receiving for free), and Wall Street, which can imagine the hefty fees it will charge for arranging trades in
allowances and futures trading to hedge against Cost Uncertainty.126 However, the carbon tax will also
have its supporters, primarily industry groups that will suffer from Cost Uncertainty under cap and
trade and prefer Cost Certainty under the carbon tax. In the end, these lobbying efforts may cancel
each other out, leaving politicians free to enact either proposal.
*AT: Misc CPs

Command and Control Fails – Climate Change/Costs

( ) Command and control fails to solve climate change and imposes substantially higher
costs than a cap-and-trade system
20, 2008
The alternative to a cap-and-trade system most frequently considered by policymakers is the use of
command-and-control standards, such as energy efficiency or emissions performance standards, which
require firms and consumers to take particular actions that directly or indirectly reduce emissions. The costs
of standards are often largely invisible except to those directly affected by them. But in fact, those costs
would be significantly greater than under sound market-based policies, because standards offer firms
and consumers far less flexibility in reducing emissions, and they cannot target many low-cost
emissions reduction opportunities. Moreover, the effectiveness of standards in achieving nationwide
emissions targets is highly uncertain, in part because they could cover only a fraction of those
emissions, leaving many sources unregulated. In contrast, market-based policies can cover all sources of
fossil fuel-related CO2 emissions, and unlike other alternatives, a cap-and-trade system can essentially
guarantee achievement of emissions targets for sources covered by the cap.
Cap Exemptions Bad – Innovation/Climate Change

( ) An economy-wide cap is key to technological innovation that reduces costs of
compliance dramatically – and if the cap BEGINS with exemptions, political pressure will
prevent expanding the cap later
20, 2008
Third, an economy-wide cap creates incentives for innovation in all sectors of the economy. Such
innovation increases each sector’s potential to contribute cost-effective emissions reductions in future
years, and the resulting long-run cost savings from starting with a broad scope of coverage may far
exceed any short-term gains. In theory, a policy that proposes to eventually expand an initially narrow
scope of coverage might create broad incentives for innovation. But achieving that subsequent
expansion would be difficult in practice, given that the adjustments that sectors face upon joining the
cap will only become greater over time as the cap’s stringency increases. Thus political obstacles to
expanding the cap may grow over time as the cap becomes more stringent.
Cap Exemptions Fail – Economy

( ) A broad cap is far better for the economy than a cap with exemptions for particular
industries
20, 2008
The aggregate costs of emissions reductions undertaken to meet a cap are directly affected by the scope
of coverage. Emissions reduction programs are subject to economies of scope: costs decline more than
proportionately as the program’s scope increases. An upstream point of regulation makes economy-wide
coverage feasible, thus exploiting these economies.
Three factors contribute to these lower costs. First, a broader cap expands the pool of low-cost emissions
reduction opportunities that can contribute to meeting a national target. Even if a sector may contribute
only a small portion of reductions, including that sector under the cap can yield significant cost savings
by displacing the highest-cost reductions that would otherwise be necessary in other sectors. For
example, it has been estimated that the cost of achieving a 5 percent reduction in U.S. CO2 emissions
could be cut in half under an economywide cap compared with a cap limited to the electric power
sector (Pizer et al. 2006).
Second, an economy-wide cap provides important flexibility to achieve emissions targets given
uncertainties in emissions reduction costs across sectors. By drawing from a broader, more diverse set
of emissions reduction opportunities, an economywide cap reduces the risk of unexpectedly high costs,
much as investing in a mutual fund reduces investment risk through diversification.
Cap Exemptions Fail – Costs/Climate Change

( ) Exempting sectors fails and undermines the system’s ability to solve climate change
20, 2008
“It Would Be Better to Begin with Narrow Coverage Across a Few Sectors.” Some have argued that, for
political expediency, any cap-and-trade system should start by covering only a few sectors and then
broadening coverage over time, rather than imposing an economy-wide system as proposed here.
There are several problems with beginning with narrow coverage. First, narrow coverage is inevitably
more costly for any given amount of environmental gain, because some of the lowest-cost emissions
reduction opportunities are taken off the table. Second, the best way to deal with the political forces
that prompt the recommendation for narrow coverage seems to be to begin broad and then go deep
(Schmalensee 1998). Resistance from uncovered sectors will only increase as the stringency of policy
and the corresponding economic burdens increase—as has been observed in the debates surrounding
proposals to expand the sectoral coverage of the European Union’s downstream cap-and-trade program.
Opt-In Programs Bad – Climate Change

Opting-in allows companies whose emissions were going to fall anyways and thus removes
all incentives to further reduce pollution
The ease with which Phase II units could choose to opt-in to Phase I was not without some potential
environmental costs. In principle, units opting-in were to be given allowances equal to their emissions had
they not opted-in. In practice, projecting hypothetical emissions was difficult because of the time that had
elapsed between the determination of the baseline and the receipt of the allowances. One major problem
was that trends in coal markets were causing many units to switch to lower sulfur coal anyway. Instead
of only those facilities with low abatement costs choosing to opt-in, opting-in became attractive for
facilities whose emissions would have fallen below the baseline levels anyway without the additional
reductions required by Title IV. In such cases, the difference between the defined baselines and actual
emissions created “anyway emissions reductions” and an associated incentive to opt-in to Phase I to
obtain valuable allowances that would not be required to cover actual emissions.26
Opt-in programs undermine the potential solvency of emissions trading systems.

Opt-in or voluntary features have a strategic role that is likely to warrant their inclusion despite the problems
associated with them. Emissions trading has worked well in reducing costs and enhancing the achievement of
an environmental goal when it is linked to a specific requirement, such as the cap in a cap-and-trade program
or the mandatory standard in an averaging program. However, when participation has been voluntary, as
in the opt-in features of the Acid Rain Program and also in the EPA ET programs, the results have been
less encouraging. An unavoidable element of “moral hazard” is present and the regulator seems to be
faced with the unenviable choice of eliminating it, and foregoing the cost savings from expanded
emissions trading, or countenancing it, and accepting some degradation of the environmental goal.
Voluntary Action Fails – Climate Change

( ) Voluntary approaches to CO2 emissions fail – the plan is necessary
There is no silver bullet for addressing global warming, but climatologists agree that the most important
first step is to curtail the growth of carbon dioxide emissions and, as expeditiously as possible, to
reduce carbon dioxide emissions. Even the Bush Administration, which has steadfastly opposed any
mandatory reductions in greenhouse gas emissions, has recognized the need to lower carbon dioxide
emissions.76 Their voluntary emissions reduction approach has produced some successes, such as when
Wal-Mart Corporation installed energy-efficient lighting systems in stores across the country.77 But the
notion that voluntary measures, even with government support, can produce the necessary reductions
in greenhouse gas emissions is beyond wishful thinking. Indeed, during the eight years of the Bush
Administration, carbon dioxide emissions in the United States continued to grow.78 As noted above, the
United States remains a leading source of greenhouse gas emissions, and it is unlikely that the
developed world will agree to mandatory reductions in 2012 if the United States has not taken steps to
reduce its emissions before then. The new President and Congress in 2009 face the imperative of
adopting measures to control greenhouse gas emissions in the United States and thereby establishing
American credibility for the international negotiations on the next climate change treaty.
Safety Valves Don’t Solve – Climate Change

( ) Safety valves ensure the cap doesn’t solve warming
Ultimately, the only sure way of preventing Cost Uncertainty in a cap and trade regime is to build in a “safety
valve,” which would permit businesses to receive or purchase at a fixed price additional allowances if the
market price of allowances becomes too high. Several of the current proposals in Congress have such built-in
safety valves.122 However, the problem with safety valves is that they sacrifice Benefit Certainty, which
is the main advantage of cap and trade: by definition, providing extra allowances when the cap is
lowered means raising the cap.
Even if a cap and trade program has no safety valve built into it from the start, this commitment to
Benefit Certainty may be misleading. If the lowered cap begins to seriously hurt businesses and the
prices of allowances spikes, one should expect strong pressure on politicians to stop lowering the cap.
Benefit Certainty under cap and trade as implemented in practice may therefore be an illusion, while
Cost Uncertainty is very real.
Safety Valves Bad – Undermine International Linkage

( ) Building in a safety valve or other cost-containment measures kills the ability to link a
U.S. cap-and-trade program internationally
20, 2008
Third, the United States may have to choose between adopting a cost containment mechanism and
linking with cap-and-trade systems in other countries. It appears unlikely that the European Union
would agree to link its ETS with a U.S. system that employs a safety valve or other such cost
containment measure. On the other hand, the United States could link with emissions reduction credit
systems, such as CDM, even with a cost containment measure in place. In summary, compared with linking
with other cap-and-trade systems, linking with CDM would give the United States greater autonomy over the
allowance price that emerges from its system and over efforts to control cost uncertainty.
Banking Emissions Credits Bad – Climate Change

Banking of emissions credits allow companies to substantially pollute the environment
later, undermining solvency
Several features of the design of the RECLAIM program distinguish it from the Acid Rain and Lead Trading
Programs. First, a heterogeneous group of participants is covered by the program, including power plants,
refineries, cement factories, and other industrial sources. Second, the RECLAIM program distinguishes
between emissions in two geographic zones.28 Since emissions in the Los Angeles Basin generally drift inland
from the coast, sources located in the inland zone were allowed to use RECLAIM Trading Credits (RTCs)
issued for facilities in either the inland or coastal zones, but sources located in the coastal zone could use
only RTCs issued for facilities in the coastal zone. A third distinctive feature of the RECLAIM program is
that it does not allow banking because of concerns that the ability to use banked emissions might lead to
substantial increases in actual emissions in some future year, and thus delay compliance with ambient
air quality standards. RECLAIM does provide limited temporal flexibility, however, by grouping sources
into two 12-month reporting periods, one from January through December and the other from July through
June, and by allowing trading between sources in overlapping periods.
Efficiency/Tech Standards Fail – Climate Change

( ) Efficiency or technology standards are far inferior to cap-and-trade for reducing
emissions
20, 2008
Second, standards may fail to target all the determinants of emissions even from the covered sources.
Consequently, they may miss many types of potentially cost-effective emissions reductions from a given
source. For example, technology standards do not influence the rate at which less efficient capital stock
is replaced or the intensities with which old and new capital stocks are used. In fact, by lowering
operating costs, standards that increase the energy efficiency of equipment can create incentives for
more intensive use than would occur without the standards. However, this rebound effect leads to an
increase in emissions that partly offsets the reductions achieved by standards. Third, standards often
impose uniform requirements on all entities using a given type of equipment or operating a given type
of facility, even though these entities may face very different costs of reducing emissions (Newell and
Stavins 2003). Important sources of this variation include variation in how intensively different firms or
households use the regulated equipment, and variations in the carbon intensity of energy consumed. For
example, air conditioner efficiency standards impose uniform requirements nationwide despite significant
differences in air conditioner use—and hence differences in the value of increased efficiency— between hot
and cool climates. Furthermore, these standards have the same effect on electricity use regardless of
whether the avoided power generation is carbon-intensive (such as that from coal plants in the Midwest)
or not (such as that from hydroelectric facilities in the Northwest). Although policymakers could in
principle lower the overall cost of standards by targeting them to reflect the myriad different
circumstances of affected sources, such efforts are administratively infeasible.68
Standards fail – Doesn’t affect existing technology

20, 2008
Technology or performance standards are often proposed as a means of achieving emissions reductions.
Examples include efficiency standards for appliances, vehicle fuel-economy standards, best available control
technology standards, and renewable portfolio standards for electric power generators. Standards could serve
as either substitutes for or complements to a cap-and-trade system. For example, instead of including vehicle
emissions under a cap, as proposed here, emissions reductions from those sources could be achieved through
more stringent corporate average fuel economy (CAFE) standards. Alternatively, CAFE standards could be
increased within the context of an economy-wide cap (see, for example, National Commission on Energy
Policy 2004). This section compares standards with cap-and-trade with regard to environmental
effectiveness, cost-effectiveness, and distributional equity. Environmental Effectiveness Because of
practical limitations, most standards to address CO2 emissions would target energy use or emissions
rates from new capital equipment only, such as appliances, cars, or electric power plants. Retrofitting
equipment to increase efficiency or reduce CO2 emissions is usually impractical. The fact that
standards would not affect existing equipment limits the opportunity for near-term emissions
reductions. It also makes the level and timing of those reductions dependent on the rate of capital stock
turnover and therefore difficult to predict. Moreover, by increasing the cost of new capital stock but not
the cost of using the existing capital stock, standards on new sources have the perverse effect of
creating incentives to delay replacement of existing stock, which can significantly delay the
achievement of emissions reductions (Stavins 2006). The New Source Review regulations are a prominent
example of this effect.66 In addition, the tendency with standards (and taxes) for legislators to grant
exemptions to address distributional issues weakens their environmental effectiveness (and drives up costs),
whereas distributional battles over the allowance allocation in a cap-and-trade system neither raise the
overall cost of the program nor affect its climate impacts. More broadly, if standards are applied for
selective purposes but under the umbrella of an economy-wide CO2 cap-and-trade system, the
standards will offer no additional CO2 benefits as long as the cap-and-trade system is binding.
Air Quality Regulations Don’t Solve – Climate Change

Emission reductions key - Air quality is useless regarding CO2 emissions
Moreover, it is the aggregate effect of carbon dioxide emissions that is so damaging, because of the
resulting build-up of carbon dioxide concentrations in the atmosphere. As a result, each state
contributes to the global warming problem, yet the Clean Air Act concepts of “attainment” and
“nonattainment” with ambient air quality standards would have little meaning where carbon dioxide
emissions are involved. For traditional air pollutants, attainment means that air quality within that
state (or regions within the state) is within acceptable limits from a human health standpoint; the air is
“safe” to breathe. But safe levels of carbon dioxide emissions can only be attained when emissions
reductions occur throughout the United States – and the rest of the world.86
( ) Air quality standards are near useless in regulating CO2 emissions

It is far from clear, however, that a meaningful national ambient air quality standard could be set for
carbon dioxide. The national ambient air quality standards that have been set to date are based on
toxicological findings regarding the harmful effects of the pollutants involved.85 While there is no
question that carbon dioxide emissions will have harmful effects over time, their impact is far less
direct than the other criteria pollutants. Particulate matter, for example, is a criteria pollutant because it
causes asthma and other respiratory difficulties. Carbon dioxide emissions, on the other hand, lead to
harmful global warming, but it is the effects of the resulting climate change, not the carbon dioxide
emissions themselves, that causes significant health effects. In this regard, carbon dioxide is unlike other
pollutants that are regulated under the Clean Air Act; indeed, absent the greenhouse effect, carbon
dioxide would not be considered a pollutant.
EPA Regulations of Auto Emissions Don’t Solve – Climate

( ) EPA regulations of auto emissions don’t solve climate nearly as well as the plan
But even if EPA were to exercise its authority to limit motor vehicle emissions under the Clean Air Act,
meaningful carbon dioxide emissions reductions from automobiles would not occur for some time. Any
proposed rulemaking regarding carbon dioxide emissions from motor vehicles would take time to
develop within EPA and then would be the subject of extensive negotiations with the auto industry and
environmental groups before EPA could issue a final rule.92 Once the rulemaking was completed, the auto
industry would need time to develop the necessary technology to improve fuel economy and/or limit
carbon dioxide emissions. EPA also would need to address the issue of standards for the increasing
volume of imported cars in the United States. As a practical matter, therefore, carbon dioxide emissions
limits for motor vehicles could not be effective for at least several years. In addition, once emissions
limits for motor vehicles became effective, they only would affect new cars; existing cars, manufactured
at a time when there were no carbon dioxide emissions limits under the Clean Air Act, would not be
affected. With many Americans owning their cars longer93 – and new vehicles likely to be more
expensive because of the cost of installing better pollution control equipment94 – it would be several
years more before the majority of cars were lower emission vehicles. The beneficial effect of motor
vehicle emissions limits therefore might not be seen for a decade or more after they were adopted, which
is far too long to wait for meaningful carbon dioxide emission reductions.
***AT: Ks
Framework Impact – Small Differences in Climate Policy Key

( ) Policy details and small differences in climate policy are profoundly important to their
overall success
20, 2008
It is important to identify an appropriate policy instrument at the outset, to avoid creating
constituencies that will later resist change (Repetto 2007). Once a policy architecture is put in place, it
can be exceptionally difficult to change. For example, any policy of significant scope, once implemented,
leads to institutional investments in both the public and the private sectors. And as people learn how to
operate within the policy, status quo bias sets in. Some sectors and interests will benefit from any
policy, and these groups will resist subsequent reform. Thus the stakes associated with policy design
are significant. A poorly designed policy could impose unnecessarily high costs or unintended
distributional consequences while providing little public benefit, and could detract from the development
of and commitment to a more effective long-run policy. In the case of climate change, choosing an inferior
approach could be exceptionally costly: the difference between a costeffective approach and an inferior one
could be as great as $150 billion annually (1 percent of today’s GDP), or $1.8 trillion over a decade (Repetto
2007). And because of the unique characteristics of the climate change problem, simply relying on
existing and familiar policy models will not lead to the best solutions.
AT: Commodification K
( ) There’s no link or impact to the ‘right-to-pollute’ K
20, 2008
“Cap-and-Trade Is Unethical—It Allows Firms to Buy and Sell the Right to Pollute.” Over the twenty-five
years in which market-based instruments have become an accepted part of the environmental
regulatory portfolio, the claim that cap-and-trade systems are morally flawed because they allow firms
to buy and sell the right to pollute is heard with decreasing frequency. But the argument has been made
at least as recently as the late 1990s, and in the specific context of global climate change policy (Sandel
1997). However, few would agree that people are behaving immorally by cooking dinner, heating their
homes, turning on a light, or using a computer. Yet all of these activities result in CO2 emissions
(Gaines 1997).
AT: Market/Neolib K
( ) General criticisms of the market don’t apply to our aff – market-based mechanisms are
critical to addressing the harm of climate change and avoiding the pitfalls of command-
and-control that link more to their K
The major driving force behind market-based approaches is the belief that harnessing market forces is
critical to developing the operational changes and alternative technologies needed to reduce carbon
dioxide emissions. Theoretically, reliance on market-based forces would allow development of the most
costeffective form of carbon dioxide reductions, which is less likely to occur if the government mandates
particular types of emissions controls under the Clean Air Act. Some may question whether it is wise to rely
on market forces to respond to a crisis that has been described as a market failure of epic proportions, since
free market forces have failed to account for the enormous economic and social costs that would accompany
global climate change.98 From an economic standpoint, however, carbon dioxide emissions are the classic
externality: emissions occur at no cost to the emitting facility, but at an enormous cost to society as a
whole.99 A central feature of the market-based approaches, therefore, is developing a price signal for
carbon that incorporates the costs of that externality and drives the market toward finding acceptable
alternatives.100 It may be a leap of faith to focus on market-based solutions for environmental problems that
have their origin in the dramatic increase in carbon dioxide emissions that have accompanied
industrialization and development around the world during the last 150 years. Yet, precisely because the
increase in carbon dioxide emissions is occurring throughout the world and across all sectors of the
global economy, a market-based approach may be the best way to address all sources of carbon dioxide
emissions. In contrast, the regulatory approaches described above necessarily target individual market
sectors, which may lead to uneven emissions controls. In addition to promoting the most cost-effective
solutions, market-based limits allow the significant costs of carbon dioxide emission reductions to be
distributed more evenly across the economy.101 Any carbon mitigation strategy will have economic
impacts, and no approach can eliminate all disproportionate effects, but a market-based strategy is
likely to allow costs to be shared most equally, because it affects the entire economy. Finally, a market-
based approach can be implemented more rapidly than the regulatory approaches described above,
particularly if a carbon tax is utilized.
***Topicality
Cap and Trade Distinct from Command and Control

( ) Cap-and-trade is a market incentive program – topic literature explicitly distinguishes
it from a command-and-control approach
20, 2008
The alternative to a cap-and-trade system most frequently considered by policymakers is the use of
command-and-control standards, such as energy efficiency or emissions performance standards, which
require firms and consumers to take particular actions that directly or indirectly reduce emissions. The
costs of standards are often largely invisible except to those directly affected by them. But in fact, those costs
would be significantly greater than under sound market-based policies, because standards offer firms
and consumers far less flexibility in reducing emissions, and they cannot target many low-cost emissions
reduction opportunities. Moreover, the effectiveness of standards in achieving nationwide emissions targets is
highly uncertain, in part because they could cover only a fraction of those emissions, leaving many sources
unregulated. In contrast, market-based policies can cover all sources of fossil fuel-related CO2 emissions, and
unlike other alternatives, a cap-and-trade system can essentially guarantee achievement of emissions targets
for sources covered by the cap.
Cap and Trade is an Incentive

Emissions trading is a form of incentive
Vol. 14, No. 3)
Emissions trading—one option in a suite of economic incentive instruments that economists, regulators,
and policymakers have introduced over the last quarter century—refers to the use of transferable
rights, allowances, or credits in programs to control emissions.1 This examination of how emissions
trading programs evolved argues that the first emissions trading programs were an unintended consequence
of the Clean Air Act of 1970. Despite some early theoretical work by economists, most precedent-setting
decisions were made as regulators, firms, environmental groups, and policy analysts struggled to address
practical issues of implementation associated with the Clean Air Act. Today, after almost three decades
of practice and theory having refined one another, the ability of program designers and policy analysts to
anticipate and address the challenges of specific trading applications has significantly improved. However,
some early decisions resulted in precedents that have never received the level of deliberation and debate they
warrant.
Cap and trade provides incentives for inovations

20, 2008
Given the long-term nature of climate change, it is exceptionally important that the cap-and-trade
approach provide incentives for long-term technological change. Technologies yet to be developed may
significantly reduce the long-run cost of achieving climate policy objectives (Jaffe, Newell, and Stavins
2003). It is critical that climate policies encourage innovations in technologies and in how fossil fuels are
used. By rewarding emissions reductions, however they are accomplished, the cap-and-trade system
provides broad incentives for innovations that lower the cost of achieving emissions targets.
Cpa and trade is the strongest incentives for invoations to meet targets
20, 2008
Compared with market-based policies, standards yield weaker incentives for the development of new
emissions reduction technologies. For example, unlike market-based policies, standards for energy
consumption by air conditioners would not provide clear or certain rewards for the development of air
conditioners that are more efficient than the standards require. This difference in incentives is
particularly acute for more advanced technologies that are still in the innovation phase and have not yet been
sufficiently deployed to have any associated standards. As new technologies emerge and increasingly
stringent emissions targets must be met, pursuit of a standards-based approach would require
continual adjustments to the standards, at a significant administrative cost, to ensure that
responsibilities for emissions reduction continue to be distributed across regulated sources in a
reasonably cost-effective manner. By contrast, under a cap-and-trade system, only the emissions cap
need be changed over time. Firms and households will respond to emerging technologies and increasing
carbon price signals by adopting those technologies, measures, and efficiency improvements that offer the
least costly emissions reductions.
Cap and Trade is an Incentive

Cap and trade provides incentives for new technologies
20, 2008
Despite their differences in specific implementations, the carbon tax and cap-and-trade have much in
common. Both are market-based instruments, able to achieve goals cost-effectively and provide
incentives for technological change to bring costs down in the long term. Either can be used to regulate
emissions upstream, at the mine, refinery, or processor, and so more easily bring emissions throughout the
economy under their sway. Either can include offsets for uncovered sources and for CCS. And both provide a
measure of cost certainty: a tax program through the tax rate itself, and a capand- trade system through the
proposed flexibility mechanisms.
AT: Effects-T
( ) Game over – cap-and-trade directly incentivizes the use of alternate energy technology
20, 2008
The cost of achieving significant greenhouse gas emissions reductions in future years will depend
critically on the availability and cost of low- or nonemitting technologies. A cap-and-trade system that
establishes caps extending decades into the future generates price signals that provide incentives for firms
to invest in the development and deployment of such technologies, thereby lowering the future cost of
reducing emissions. To create these incentives, a cap-and-trade system must provide credible
commitments to meeting long-run emissions targets.9 If a lack of credibility makes the payoff from
investments in the new technologies highly uncertain, these investments will lag (Montgomery and Smith
2007). On the other hand, policymakers also need to maintain flexibility to adjust long-term targets as new
information is obtained regarding the benefits and costs of mitigating climate change. Managing this trade-
off between the credibility of long-run targets and flexibility is important for the success of any climate
policy.
( ) Emissions trading directly incentivizes a switch to renewable energy

2008
Under an upstream emissions cap-and-trade system, primary fuel producers would be required to hold
allowances for the potential greenhouse gas emissions embodied in their fuels. Producers, processors or
carriers of fossil fuels (coal, oil and natural gas) would be required to hold allowances, while producers of
renewable energy such as wind generally would not.3 Because each allowance would represent the right to
produce or sell one ton of future carbon emissions, coal and oil companies would need more allowances for
each unit of energy sold than producers of natural gas. Firms that produced or sold fewer embodied carbon
emissions than they were allowed would be able to sell their excess allowances to companies that produced
or sold more than they were allowed. An upstream system would impact energy use and carbon
emissions through the price signal: Coal and oil prices would increase more on a BTU basis than the
price of natural gas, while renewable energy options such as wind power would not increase at all.
Energy users thus would be encouraged to move away from coal and oil use toward natural gas,
renewable energy and energy efficiency.
AT: Extra-T
( ) It’s impossible for cap-and-trade to be extra-topical - it caps emissions by measuring
the carbon embodied in fuels, rather than emissions once they’re burned – that means only
switching to alternate fuels allows industries to sell their permits
2008
Another possible disadvantage of an upstream system is that it would provide no incentive to employ end
use emissions treatment technologies such as carbon dioxide scrubbers. This is because an upstream
system would account for potential emissions by estimating the carbon embodied in fuels rather than
by monitoring actual stack emissions, as would be the case in a downstream system, at least in the
electricity sector. CO2 scrubbing is not now cost-effective, but it might be in the future. If so, then this issue
would have to be addressed. One option would be to create an allowance set-aside to reward the use of
scrubbers. Another would be to allow fuel producers to purchase the emissions reductions from scrubbers as
“offsets” of their own emissions, in the same way that companies are now funding carbon sequestration
projects.

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Gonzaga Debate Institute 2008 1

Scholars Permits Aff

Cap and Trade Aff – Version 1

Inherency – No Cap and Trade/Federal Emissions Limits

Inherency – Federal Climate Policy Incoherent

Inherency – Lack of Climate Action – General

The United States has no system of regulating CO2 emissions now

Cap and Trade Reduces Oil Demand

Yes Warming/Rate Increasing

U.S. Key to Warming

Reducing Emissions Now Key

Cap and Trade Solves Climate Change

( ) A cap-and-trade system averts climate change while preserving economic growth

Cap and Trade Solves Climate Change – Economy-Wide Key

Cap and Trade Solves Climate Change – Innovation/Renewables

Cap and Trade Solves Climate Change – Spillover

Cap and Trade Now Solves Wars from Warming

AT: Warming Good

***Trade Wars Advantage

Trade Wars Advantage – 1AC

( ) The U.S. will retaliate to any EU attempt at taxing carbon-heavy imports

Trade Wars Advantage – 1AC

( ) WTO collapse causes global nuclear war

Trade Wars Advantage – 1AC

Trade Wars Advantage – Internal Link

Cap and Trade Good – Economy

Cap and Trade Popular with Businesses

Cap Phase-In Solves Economy Links

Gradual changes in the economy solve all the impacts

AT: Cap and Trade Kills GDP

Reductions would only be 1% less then expected at most.

AT: Economy Links – Delay Makes it Worse

AT: Cap and Trade Hurts Competitiveness

Cap and Trade Solves – General

Cap and Trade Solves – Empirics

Cap and Trade Works – Empirics – Acid Rain

Cap and Trade Solves – Economic Growth, Warming, Oil

AT: Alt Causes/Cap and Trade Not Enough

AT: Cap and Trade Diverts Attention/Masks Problems

AT: California Proves Command Control Better

AT: Clean Air Act proves Emissions trading doesn’t work

AT: Cap and Trade Doesn’t Solve Transportation Sector

AT: Entry Barriers/Bad for Competition

FYI: Plan Ideas

FYI: Upstream vs. Downstream

FYI: Explanation of Upstream

FYI: Who Would/Should Get Permits

Upstream Better than Downstream – Coverage

Upstream Key – Coverage – With Impact

Upstream Better than Downstream – Admin

Upstream Key to Solve Climate

Upstream Key to Feasibility

Downstream Fails – Monitoring/Efficiency

AT: Upstream Fails/Downstream Better

No Cost Difference for Consumers between Up and Downstream

Auctions Good – Key to Economy

Auctioning is best for the economy- 4 reasons.

Auctioning Good – Key to Economy

Auctioning Good – Lowers Energy Prices

Auctioning Good- Taxes/Economy

Auctioning Good- Innovation

Auctions Good – Revenue

Auction Better than Giveaways – Empirics