@techreport{NBERw14258,
 title = "Balancing Cost and Emissions Certainty: An Allowance Reserve for Cap-and-Trade",
 author = "Brian C. Murray and Richard G. Newell and William A. Pizer",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "14258",
 year = "2008",
 month = "August",
 URL = "http://www.nber.org/papers/w14258",
 abstract = {On efficiency grounds, the economics community has to date tended to emphasize price-based policies to address climate change -- such as taxes or a "safety-valve" price ceiling for cap-and-trade -- while environmental advocates have sought a more clear quantitative limit on emissions. This paper presents a simple modification to the idea of a safety valve: a quantitative limit that we call the allowance reserve. Importantly, this idea may bridge the gap between competing interests and potentially improve efficiency relative to  tax or other price-based policies. The last point highlights the deficiencies in several previous studies of price and quantity controls for climate change that do not adequately capture the dynamic opportunities within a cap-and-trade system for allowance banking, borrowing, and intertemporal arbitrage in response to unfolding information.},
}