Creating a U.S. Carbon Market

President Obama’s recent budget proposal is a strong indication that the current Administration will take the first real steps towards realizing a nationwide cap-and-trade system in the United States. Examining existing cap-and-trade systems such as the European Union Emissions Trading Scheme (“EUETS”), the Regional Greenhouse Gas Initiative (“RGGI”), and the New South Wales Greenhouse Gas Abatement Scheme (“NSW Scheme”) illustrates the value of two increasingly common features that the United States should consider: auctions and offset mechanisms. As this article shows, these mechanisms can address major concerns with cap-and-trade by mitigating price distortion and encouraging technological advances