Tim Profeta raised the issue of state programs that are already underway ahead of federal government action—these will inevitably interact and will not necessarily be preempted by a federal program. Therefore, he urged more consideration of how state programs would interact with a uniform national effort—what are the potential efficiencies or inefficiencies of a patchwork approach? He also pointed out, as did subsequent participants, that transportation is being handled differently than other sectors. In some analyses, costs to electric utilities increase if transportation is included in a cap-and-trade program. Therefore, more work is needed to understand the impacts of alternative mechanisms to handle transportation, or to model the effects of incorporating the transportation sector at a later date. Transportation may also be subject to complementary measures such as a vehicle miles traveled (VMT) reduction program, and so analyses must consider potential complementarities.

Trade was another issue brought up by several participants. On the question of energy-intensive imports, Bob Shackleton noted that accounting for these will be one of the most important and persistent questions that must be addressed. Francisco de la Chesnaye urged more forward thinking on international linkages, such as how a U.S. domestic system might link to the international community, especially if a European program would not accept a safety valve (i.e. a price ceiling) for a cap and trade program. Tom Kram also noted that his colleagues at the Netherlands Environmental Assessment Agency recently released a study examining effects of border trade—this study assumes that the EU would proceed ambitiously with mitigation programs while the rest of the world lags (den Elzen et al., 2008).

Impacts—Distribution and Equity

Panelists and participants emphasized that policymakers are more interested in relative outcomes than in absolute outcomes in terms of GDP. Regional impacts are often more important, from a policymaker perspective, than an aggregated impact, and globally, countries might be more concerned with impacts vis-à-vis a neighbor or competitor and thus with relative rather than absolute gains. Bob Shackleton pointed out that this sort of information may not be as relevant to estimating temperature outcomes but is vital to getting policies in place. He also noted that there is an interest in better calculations of benefits, including damages averted—policymakers want a realistic understanding of what the likely outcomes are of various policies, or what the relative outcomes are. This is critical to mitigation policy development, policy stringency, and timing.

Understanding the distribution of costs is vital to policymakers. Shackleton pointed out that policymakers are interested in more detailed analyses on impacts by sector and industry, impacts at a state level, changes in the job market, impacts at various income levels, and international material and trade flows—in short, policymakers care more about equity and distribution than efficiency. Policymakers are particularly concerned with burdens that might be imposed on low-income households, and how existing policy frameworks might be utilized to offset some of these impacts. Nat Keohane agreed that distribution and equity are primary concerns because impacts are regional as much as they are partisan. He noted, as did many participants, that not enough models can provide estimates of regional impacts. He further pointed out that equilibrium models are often based on full employment, but this assumption is not realistic, and policymakers are very concerned about impacts on jobs.

Keohane also questioned how well models were able to identify “winners and losers” among industries. He stated that information on allocations and industrial performance is likely to need updating. Dimitri Zenghelis agreed that policymakers would like clarity about the amount of risk faced by energy-intensive industries in particular, and noted that a recent report by the World Resources Institute and the Peterson Institute for International Economics (Houser et al., 2008) suggests that these risks might be exaggerated in the absence of firm analysis.

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