Center on Budget and Policy Priorities

Climate Change

Policy Basics: Policies to Reduce Greenhouse Gas Emissions

Cap and trade and its close cousin a carbon tax are the approaches that most economists favor for reducing greenhouse gas emissions. These market-based approaches work by creating incentives for businesses and households to conserve energy, improve energy efficiency, and adopt clean-energy technologies — without prescribing the precise actions they should take.

Policy Basics: Climate-Change Legislation and Low-Income Consumers

“Putting a price on carbon” through market-based policies like cap and trade or a carbon tax is the most cost-effective way to reduce greenhouse gas pollution. But the higher prices of fossil-fuel energy products would also squeeze consumers’ budgets. Fortunately, well-designed climate policies can generate enough revenue to fully offset the impact of the higher prices on the most vulnerable households, as well as to cushion the impact for many other households and meet other public needs, such as expanded research on alternative energy technologies. And they can do this without blunting the market “price signal” that is essential for achieving cost-effective emissions reductions.

Basics

Policies that restrict greenhouse-gas emissions will significantly raise the price of fossil-fuel energy products. That is necessary to encourage energy efficiency and greater use of clean energy sources, but it will pose serious challenges for low- and moderate-income households. Fortunately, well-designed climate policies can reduce greenhouse gas emissions in a way that does not increase poverty or otherwise harm low- or moderate-income households and is fiscally responsible.

- Policies to Reduce Greenhouse Gas Emissions
- Climate-Change Legislation and Low-Income Consumers

Featured Experts

Robert Greenstein

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Chad Stone

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The Center analyzes the potential effects of climate change policies on low- and moderate-income households and the federal budget. It also designs measures to ensure that the increased energy prices resulting from climate change legislation do not drive more households into poverty or make poor households poorer.