Options for Addressing Early Action Greenhouse Gas Reductions and Offsets in U.S. Federal Cap-and-Trade Policy

The document analyzes how a U.S. federal cap-and-trade system can address 'early action'—emissions reductions occurring before the program's start. It argues that awarding credits from 'under the cap' preserves environmental integrity, whereas credits 'above the cap' risk inflating permissible emissions. The paper details the challenges of verifying reductions for voluntary direct, indirect, and offset actors, particularly regarding additionality and leakage. It also proposes mechanisms for transitioning existing regional programs, such as the Regional Greenhouse Gas Initiative (RGGI), into a federal system using dollar-for-dollar allowance exchanges to prevent price volatility.

• Awarding early action credits from a finite pool of allowances taken from 'under the cap' allows the government to recognize early actors without compromising the overall emission reduction goals of the cap-and-trade program.
• To maintain environmental integrity, early action credits should be limited to projects that are voluntary, real, permanent, quantifiable, and verifiable. If allowances are added 'above the cap', additionality must also be considered, though current registries often lack the output data necessary to assess emissions leakage.
• The 'pre-regulatory' phase—the period between the passage of legislation and the program's launch—is the easiest time to identify 'additional' reductions because the promise of rewards and regulatory certainty encourage action.
• Scope 3 indirect emission reductions should not be rewarded for early action due to a high risk of double counting, as these reductions are likely already classified as another company's Scope 1 direct reductions.
• Transitioning regional cap-and-trade programs into a federal system requires mechanisms to avoid price spikes and speculative activity. The author suggests exchanging regional allowances for federal ones on a dollar-for-dollar basis rather than a ton-for-ton basis to preserve existing market pricing.
• For existing programs that impose emission standards on facilities rather than a cap-and-trade system (such as those in Oregon, Washington, and Massachusetts), awarding allowances from above the cap could undermine state environmental benefits by allowing other regulated entities to emit more.

APA

Kelly, A., Bianco, N., & Larsen, J. (2009). Options for Addressing Early Action Greenhouse Gas Reductions and Offsets in U.S. Federal Cap-and-Trade Policy. World Resources Institute. http://wriorg.s3.amazonaws.com/s3fs-public/options_for_early_action_greenhouse_gas_reductions.pdf

Chicago

Kelly, Alexia, Nicholas Bianco, and John Larsen. Options for Addressing Early Action Greenhouse Gas Reductions and Offsets in U.S. Federal Cap-and-Trade Policy. World Resources Institute, 2009. http://wriorg.s3.amazonaws.com/s3fs-public/options_for_early_action_greenhouse_gas_reductions.pdf.

Wikipedia

{{cite report |last1=Kelly |first1=Alexia |last2=Bianco |first2=Nicholas |last3=Larsen |first3=John |title=Options for Addressing Early Action Greenhouse Gas Reductions and Offsets in U.S. Federal Cap-and-Trade Policy |publisher=World Resources Institute |date=August 2009 |url=http://wriorg.s3.amazonaws.com/s3fs-public/options_for_early_action_greenhouse_gas_reductions.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kelly2009options, author = {Kelly, Alexia and Bianco, Nicholas and Larsen, John}, title = {{Options for Addressing Early Action Greenhouse Gas Reductions and Offsets in U.S. Federal Cap-and-Trade Policy}}, institution = {World Resources Institute}, year = {2009}, month = aug, url = {http://wriorg.s3.amazonaws.com/s3fs-public/options_for_early_action_greenhouse_gas_reductions.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }