Allowance Price Containment Options for Cap-and-Trade Legislation

Nicholas Institute Discussion Memo on H.R. 2454 American Clean Energy and Security Act of 2009

Author(s): Peter Maniloff and Brian Murray

Published: October 2009

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This memo examines allowance price containment options under the type of greenhouse gas (GHG) cap-and-trade program now being debated in the U.S. Congress. It first explains why price containment has been deemed a critical feature of any federal cap-and-trade program and then describes how price containment is handled in the Waxman-Markey bill (The American Clean Energy and Security Act of 2009, hereafter referred to as H.R. 2454) that passed the House of Representatives this summer. It introduces some possible modifications to that approach that parties are considering and concludes with issues that the Nicholas Institute for Environmental Policy Solutions has started to internally examine. It proposes further research that may help to guide policy modification by the Senate if needed.