author. REGULATORY POLICY PROGRAM The Regulatory Policy Program at the Mossavar-Rahmani Center for Business and Government provides an environment in which to develop and test leading ideas on regulation and regulatory institutions. RPP’s research aims to improve the global society and economy by understanding the impacts of regulation and creating better decisions about the design and implementation of regulatory strategies around the world. RPP’s efforts are organized around the following three core areas: regulation, markets, and deregulation; regulatory instruments; and regulatory institutions and policymaking.

We examine the extent to which various environmental policy instruments meet major evaluation criteria, including cost-effectiveness, distributional equity, minimization of risk in the presence of uncertainty, and political feasibility. Instruments considered include emissions taxes, tradable emissions allowances, subsidies for emissions reductions, performance standards, technology mandates, and research and development subsidies. Several themes emerge. First, no single instrument is clearly superior along all the criteria. Second, significant trade-offs arise in the choice of instrument; for example, assuring a reasonable degree of distributional equity often will require a sacrifice of cost-effectiveness. Third, it is possible and sometimes desirable to design hybrid instruments that combine features of various instruments in their “pure ” form. Fourth, for many pollution problems, more than one market failure may be involved, which may justify (on efficiency grounds, at least) employing more than one instrument. Finally, potential overlaps and undesirable interactions among environmental policy instruments are sometimes a matter of concern.

The Brookings InstitutionThe Hamilton Project seeks to advance America’s promise of opportunity, prosperity, and growth. The Project’s economic strategy reflects a judgment that long-term prosperity is best achieved by making economic growth broad-based, by enhancing individual economic security, and by embracing a role for effective government in making needed public investments. Our strategy—strikingly different from the theories driving economic policy in recent years—calls for fiscal discipline and for increased public investment in key growthenhancing areas. The Project will put forward innovative policy ideas from leading economic thinkers throughout the United States—ideas based on experience and evidence, not ideology and doctrine—to introduce new, sometimes controversial, policy options into the national debate with the goal of improving our country’s economic policy. The Project is named after Alexander Hamilton, the nation’s first treasury secretary, who laid the foundation for the modern American economy. Consistent with the guiding principles of the Project, Hamilton stood for sound fiscal policy, believed that broad-based opportunity for advancement would drive American economic growth, and recognized that “prudent aids and encouragements on the part of government ” are necessary to enhance and guide market forces.

Federal policies aimed to slow global warming would impose potentially significant costs on households that vary depending on the policy approach that is used. This paper evaluates the effects of a carbon dioxide cap-and-trade program on households in each of 11 regions of the country and sorted into annual income deciles. We find tremendous variation in the incidence (the distribution of cost) of the policy. The most important feature that affects households is how the policy distributes the value created by placing a price on CO2 emissions. We evaluate 10 policy alternatives that yield results that range from moderately progressive (expansion of the Earned Income Tax Credit, investments in efficiency and capand-dividend) to severely regressive (reduce income taxes, free distribution to incumbent emitters and reduction of the payroll tax). To varying degrees the allocation of the value of emissions allowances amplifies or potentially resolves the tradeoff between equity and efficiency.

Ground level ozone pollution has become a concerned air pollution problem in Beijing. Because of the complex way in which ozone is formed, it is difficult for policy makers to identify optimal control options on a cost-effective basis. This paper identifies and assesses a range of options for addressing this problem. We apply the Ambient Least Cost Model and compare the economic costs of control options, then recommend the most effective sequence to realize pollution control at the lowest cost. The study finds that installing of Stage II gasoline vapor recovery system at Beijing’s 1,446 gasoline stations would be the most cost-effective option. Overall, options to reduce ozone pollution by cutting vehicular emissions are much more cost-effective than options to “clean up” coal-fired power plants.

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper recommends a system of upstream taxes on fossil fuels, combined with refunds for downstream emissions capture, to reduce carbon and local pollution emissions. Motor fuel taxes should also account for congestion and other externalities associated with vehicle use, at least until mileage-based taxes are widely introduced. An examination of