8ee1e895_r_Climate_and_Energy_Solutions__Compliance_Cost_Certainty
[Policy] Performance Standard (rate-based, tradable) [Innovation] Yes - firms have incentive to innovate to reduce emissions and avoid buying allowances (or to have more excess allowances to sell). [Environmental Certainty] Some - a rate-based standard determines the emission-intensity of output; but total emissions will vary with output. [Linkability] Yes - resulting “carbon price” could theoretically be linked to other trading programs. [Expansion] No - difficult to expand beyond initial sector. [Revenue Recycling] No [Compliance Cost Certainty] 
No - difficult for policymakers to foresee trading prices based on sector-wide marginal compliance costs.
Market Mechanisms: Understanding the Options | Center for Climate and Energy Solutions