Market-Based Greenhouse Gas Emission Reduction Legislation: 108th Through 115th Congresses

Summary

Congressional interest in market-based greenhouse gas (GHG) emission control legislation has fluctuated over the past 15 years. During that time, legislation has often involved market-based approaches, such as a cap-and-trade system or a carbon tax or fee program. Both approaches would place a price—directly or indirectly—on GHG emissions or their inputs (e.g., fossil fuels), both would increase the price of fossil fuels, and both would reduce GHG emissions to some degree. Both would allow emission sources to choose the best way to meet their emission requirements or reduce costs, potentially by using market forces to minimize national costs of emission reductions. Preference between the two approaches ultimately depends on which variable policymakers prefer to precisely control—emission levels or emission prices.

A primary policy concern with either approach is the economic impacts that may result from the program. Expected energy price increases could have both economy-wide impacts (e.g., on the U.S. gross domestic product) and disproportionate effects on specific industries and particular demographic groups. The degree of these potential effects would depend on a number of factors, including the magnitude, design, and scope of the program and the use of tax or fee revenues or emission allowance values.

This report includes a separate table for each Congress, comparing GHG emission reduction legislation by the following characteristics:

General framework: the proposed program structure and scope in terms of emissions covered, multiple GHG emissions, or just carbon dioxide (CO2) emissions.

Covered entities/materials: a list of the industries, sectors, or materials that would be subject to the program.

Emissions limit or target: the GHG or CO2 emissions target or cap for a specified year.

Distribution of allowance value or tax revenue: how emission allowance value or carbon tax or fee revenue would be distributed.

Offset and international allowance treatment: the degree to which offsets and international allowances could be used for compliance purposes and the types of offset activities that would qualify.

Mechanism to address carbon-intensive imports: a U.S. GHG reduction program may create a competitive disadvantage for some domestic businesses, particularly carbon-intensive, trade-exposed industries.

Additional GHG reduction measures: other mechanisms designed to further reduce GHG emissions that are not covered in the central program.

As the figure below illustrates, between the 108th and 111th Congresses, most of the introduced bills would have established cap-and-trade systems. Between the 112th and 115th Congresses, most of the introduced bills would have established carbon tax or emissions fee programs.

Figure 1.Number and Type of Introduced GHG Emission Reduction Bills

108th Congress through 115th Congress

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Source: Prepared by CRS.

Notes: “Other Approaches” include (1) proposals that did not specify the overall framework but would have authorized EPA to establish a GHG emission reduction program, and (2) proposals that combine elements from a cap-and-trade system with price control features in a carbon tax or emissions fee system, sometimes described as hybrid approaches.

The carbon tax/fee proposals from the 115th Congress ranged in their scope from CO2 emissions from fossil fuel combustion to multiple GHG emissions from a broader array of sources. They also varied in their initial carbon price from $24/ton to $50/ton. In addition, the proposals differ by how, to whom, and for what purpose the new tax or fee revenues would be applied. Depending on the level of the tax or fee, some economic analyses indicate that policy choices to distribute the tax or fee revenue would yield greater economic impacts than the direct impacts of the tax or fee.