Monday, March 9, 2009

Cap And Trade 101

Following one of my comments on the previous grey-water thread regarding cap and trade policies and new legislation aimed at regulating carbon emissions, I wanted to post a relatively elementary primer - hence "Cap and Trade 101" - (h/t) to aid your understanding of this potentially complex subject.

What is Cap and Trade?

The goal: To steadily reduce carbon dioxide and other greenhouse gas emissions economy-wide in a cost-effective manner.

The cap: Each large-scale emitter, or company, will have a limit on the amount of greenhouse gas that it can emit. The firm must have an “emissions permit” for every ton of carbon dioxide it releases into the atmosphere. These permits set an enforceable limit, or cap, on the amount of greenhouse gas pollution that the company is allowed to emit. Over time, the limits become stricter, allowing less and less pollution, until the ultimate reduction goal is met. This is similar to the cap and trade program enacted by the Clean Air Act of 1990, which reduced the sulfur emissions that cause acid rain, and it met the goals at a much lower cost than industry or government predicted.

The trade: It will be relatively cheaper or easier for some companies to reduce their emissions below their required limit than others. These more efficient companies, who emit less than their allowance, can sell their extra permits to companies that are not able to make reductions as easily. This creates a system that guarantees a set level of overall reductions, while rewarding the most efficient companies and ensuring that the cap can be met at the lowest possible cost to the economy.
I've encountered no better or more thought provoking discussion of the Cap and Trade proposals than the Obsidian Wings post from March 6, 2009 to which I linked in comments yesterday. It's author, who goes by the pen-name hilzoy, is a Ph.D. tenured professor of bioethics and one of the most facile thinkers and persuasively progressive writers currently illuminating the blogosphere. If you haven't looked into the thread, here's the link once again: Don't Give Away Carbon Permits.

As you'll gather from the Obsidian Wings discussion, Cap and Trade is conceptually simple but the nuances can puzzle. That said, however one looks at it, Cap and Trade will never be more than a short term, stop-gap GHG-pollution mitigation effort. Because it's energy source is nonrenewable and its aim is not sustainability, Cap and Trade is, at most, a temporary band-aid on a critical major hemorrhage.

1 comment:

  1. The only way that this can be seen as anything different than just another ploy for the government to gain greater control and 'stuff' their pockets at the same time is if industry were a allowed a FREE carbon cap that was industry specific. The cap must be specific to an idustry and, therefore, could vary from sector to sector, but the number should be real and attainable. This would truly reward companies that are more efficient but also not over-penalize companies that may show some inefficiencies within certain sectors involved in their everyday processes. As it is presented at this time, this is nothing more than an energy TAX and another broken promise by the Obama Administration. However, I guess when your giving money away at the rate that he has up to this point, you've got to find some way to get it back.

    Also, for this to be viable, one must believe in global warming. I find it interesting that the liberal media continues to brush aside/hide all research that disproves the theory of global warming. I believe in conserving our resources, not to affect climate change, but because it is the right thing to do.

    This bill will destroy the ability of many, many businesses to remain viable within the the US and compete globally. The Obama administration talks of all the jobs that will be created, but what about all the jobs that will be lost. Breaking even is not good enough. Instead of being a puppet for the left wing media and politicians, push them to create a bill that will help today and long term that truly has Americans best interest at heart.