Interregional burden-sharing of greenhouse gas mitigation in the United States

Emissions trading is anattractive candidate for implementinggreenhouse gas mitigation, because it canpromote both efficiency and equity. Thispaper analyzes the interregional impacts ofalternative allocations of carbon dioxideemission permits within the U.S. Theanalysis is performed with the aid of anonlinear programming model for ten EPARegions and for six alternative permitdistribution formulas. The reason thatvarious alternatives need to be consideredis that there is no universal consensus onthe best definition of equity. Advanceknowledge of absolute and relative regionaleconomic impacts provides policy-makerswith a stronger basis for making thechoice. The analysis yields several usefulresults. First, the simulations indicatethat no matter how permits are allocated,this policy instrument can substantiallyreduce the cost of GHG mitigation for theU.S. in comparison to a system of fixedquotas for each of its regions. Interestingly, the welfare impacts ofseveral of the allocation formulas differonly slightly despite the large differencesin their philosophical underpinnings. Also, the results for some equity criteriadiffer greatly from their application inthe international domain. For example, theEgalitarian (per capita) criterion resultsin the relatively greatest cost burdenbeing incurred by one of the regions of theU.S. with the lowest per capita income.