Public concern about the impacts of rising greenhouse gas (GHG) emissions continues to put pressure on state, federal, and international policymakers to adopt tougher emissions limits. Given the range of potential legislative and regulatory outcomes in the United States, industry faces challenges in planning, implementing, and financing appropriate GHG emission controls. If federal legislation falters in 2010, there is growing potential that a complex system of overlapping state programs and federal regulations could emerge over the next year. This system could even stay in effect until federal legislation is completed.

For covered entities, such a state-federal regulatory "patchwork" could be more costly than a single, integrated national model, particularly one that is linked efficiently with international carbon markets. This is prompting numerous companies--from the electric power generators in the Edison Electric Institute (EEI) to the corporate members of the U.S. Climate Action Partnership (USCAP)--to support comprehensive federal cap-and-trade legislation. These firms hope to avoid a cumbersome state-by-state approach, or worse yet, state programs combined with source-by-source regulation of GHGs by the U.S. Environmental Protection Agency (EPA) under the Clean Air Act (CAA). Most industry support for cap-and-trade legislation is premised on the availability of cost-containment measures. These measures include ample use of domestic and international offsets (so-called where flexibilities, since they allow alternative compliance from reductions achieved at locations not covered by the legislation), as well as timing (or when) flexibilities, like banking and borrowing.