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This article examines how an integrated least-cost implementation of the Kyoto Protocol in the United States would affect U.S. competitiveness and jobs. Drawing on previous work, the authors analyze integrated emission reduction strategies based on a $50/ton carbon tax (including border tax adjustments), a payroll tax cut, energy-productivity--oriented market reforms, and international flexibility mechanisms. This policy portfolios is compared to conventional approaches that omit market and fiscal reforms., Input-output data are used to estimate the impact on export prices of goods and services produced in the United States. Similar data are used to translate changes in GDP and [...]

This article identifies and corrects shortcomings in recent modeling studies on the economics of reducing greenhouse gas emissions in the United States. The major assessments of the Kyoto Protocol--by the U.S. Energy Information Administration, the Clinton White House Council of Economic Advisers, the U.S. Department of Energy Interlaboratory Working Group, and the Stanford Energy Modeling Forum--are found to be seriously incomplete. Each study omits one or several of four major cost-reducing policy options, resulting in cost estimates that are far too pessimistic. In the present study, these shortcomings are overcome through the integrated evaluation of all major cost-cutting policy options within a coherent least-cost framework. Three domestic policies--a national carbon cap and permit trading program, productivity-enhancing market reforms and technology programs, and recycling of permit auction revenues into economically advantageous tax cuts--are combined with international emissions allowance trading. This analysis shows that an integrated least-cost strategy for mitigating U.S. greenhouse gas emissions would produce an annual net output gain of roughly 0.4% of GDP in 2010 and about 0.9% of GDP in 2020. On a cumulative net present value basis, the United States would gain $250 billion by 2010 and $600 billion by 2020. International flexibility mechanisms (including emissions trading) are of only secondary significance in realizing these productivity, output, and welfare gains. (JEL Q43, Q48), I. INTRODUCTION This is the first of two articles that reexamine the economics of mitigating greenhouse gas emissions in the United States. The present article focuses on aggregate impacts on [...]