Book contents
- Frontmatter
- Contents
- List of Figures and Tables
- Acknowledgments
- Introduction
- PART ONE EARTH'S CLIMATE HISTORY AND OUTLOOK
- PART TWO CLIMATE POLICY CHOICES
- 7 Climate Policy Goals
- 8 Policy Mandates and Market-Based Instruments
- 9 The Design of Cap-and-Trade Programs
- 10 Prices, Quantities, and Lessons from Monetary Policy
- 11 The Outlook for Climate Policies
- Appendix: Discount Rates in Climate Analysis
- References
- Index
10 - Prices, Quantities, and Lessons from Monetary Policy
Published online by Cambridge University Press: 01 June 2011
- Frontmatter
- Contents
- List of Figures and Tables
- Acknowledgments
- Introduction
- PART ONE EARTH'S CLIMATE HISTORY AND OUTLOOK
- PART TWO CLIMATE POLICY CHOICES
- 7 Climate Policy Goals
- 8 Policy Mandates and Market-Based Instruments
- 9 The Design of Cap-and-Trade Programs
- 10 Prices, Quantities, and Lessons from Monetary Policy
- 11 The Outlook for Climate Policies
- Appendix: Discount Rates in Climate Analysis
- References
- Index
Summary
Central banks have been managing the supply of money for many decades. Similarities between regulating the supply of money and regulating greenhouse gas (GHG) emissions suggests the possibility of deriving lessons for climate policy from central banking. Differences between the two types of policy problems also need to be identified to discern how climate policy approaches should differ from monetary methods. The amount of discretionary authority for a legislature to allocate to an independent policy-making body is an important concern for each type of policy framework. Monetary policy can also provide lessons regarding the methods used to manage markets in a way that facilitates the implementation of policy.
MONETARY POLICY GOALS AND INSTITUTIONAL FRAMEWORKS
Several cap-and-trade proposals, including the 2008 Lieberman-Warner bill, have called for the establishment of an independent board modeled on the Federal Reserve to assist with the implementation of the program. This chapter addresses the need for such a climate board and other lessons that can be drawn from the experiences of monetary policy. The chapter begins by explaining how the context of monetary policy compares with the framework of a cap-and-trade program for GHG.
Consider the policy challenge faced by a monetary authority. With a single primary policy instrument, it must try to achieve two key economic objectives: low inflation and full employment of resources. In the short run, there is a trade-off between these objectives. Stimulating the economy maximizes employment and production, but if overdone, it can lay the seeds for future price inflation.
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- Information
- Climate Policy FoundationsScience and Economics with Lessons from Monetary Regulation, pp. 178 - 205Publisher: Cambridge University PressPrint publication year: 2011
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