What Is Cap and Trade?
Posted on June 29, 2009 by
You’ve probably read in the news that the House has narrowly approved President Obama’s climate change bill. It’s often my knee-jerk reaction to support any measure to reduce our nation’s carbon footprint, but as responsible news gatherers, it’s our duty to examine all sides of an issue before forming an opinion.
Those who voted against the climate change bill (44 Democrats and all but eight Republicans) did so because they oppose the “cap and trade” program this bill encompasses. So what is cap and trade? It’s a process that aims to reduce greenhouse gases in a cost-effective manner. Each large-scale emitter of greenhouse gases will have to abide by a cap on the amount of greenhouse gases it can emit, and each company must have an emissions permit for every ton of carbon dioxide it releases into the atmosphere. Over time, the limits will become stricter until the ultimate pollution reduction goal is met. It will inevitably be easier and cheaper for some companies to reduce their emissions than others; in order to help the companies that will struggle more, these more efficient companies can sell their extra permits to the other companies that need them. This is where the “trade” comes in. In theory, this will reward the companies that are already energy-efficient while easing the transition for the companies that are not, while guaranteeing reductions across the board.
Sounds great, right? In some cases, it is. The Clean Air Act of 1990 is a prime example of a successful cap-and-trade program. Its goal was to reduce the sulfur emissions that cause acid rain, and it met that goal at a much lower cost than industry or government predicted. But there are some who say Obama’s bill doesn’t do enough to curb global warming. The bill originally aspired to cut greenhouse emissions by 20 percent in the next decade; in order to make it more moderate, that number was cut to 17 percent. There is also the inevitable question of how much difference these reductions would make on a global scale; it’s a bit disheartening to realize that a 17 percent reduction in American emissions is a drop in the bucket compared to the amount of greenhouse gases constantly pumped into the air by, say, China.
We also must consider the effects of this bill on household energy costs. A congressional study found that the bill would raise energy costs by less than $200 per year for the average household, but in the cases of low-income families, this is a significant amount of money. However, the president is calling this a “jobs bill,” just as he did with the economic stimulus. In his weekly radio address, Obama says this is not a case of having to choose between economic growth and investing in clean energy. If passed, he claims, this bill can have positive implications for both.
Nothing is final yet; the bill must still pass the Senate before any actions can be enacted upon the American people. What do you think of Obama’s climate change bill? Is it a positive step toward curbing global warming, or will it just increase our energy bills without making any real environmental difference?
I think it’s a step in the right direction. I also think that responsible energy costs more. Did you know you could contact your power co and ask to be put on a clean energy plan? If you as an individual are willing to pay a little more you can improve the environment right now.
I personally don’t like cap & trade. I think it’s just a recipe for corruption at the corportate & government level that the taxpayers will end up paying for. I think it will benefit large corporations more than small ones, as much government policy does. I personally think we’ll all end up paying more for electric than projected. (I’m a member of a small local electric co-op and they’re projecting an increase of about $50 per month in our electric bills, we’re not a low-income family and $600 per year would be a big hit in our wallet, I can’t imagine how low-income families will deal with the increase).
The problem is that the companies won’t be paying for the increase, consumers will. You can’t blame them, they’re in business to make money.
If we all lived in an energy conscious manner we probably wouldn’t be having this problem. I know we really focus on conservative energy use and we use far less than many people we know. What a difference we could make if we all made responsible choices. The sad thing is that high costs probably won’t make people more energy conscious, they’ll just complain more and try to sign up for assistance programs.
We would be better focusing on other areas of environmental pollution by limiting state & local tax incentives for companies to move into their areas and forcing companies to clean up after themselves when the leave these locations. Or perhaps focusing on limiting food traveling miles and food production pollution.
So many loopholes, so many ways to cheat.
I favor a far simpler, far more draconian, and far harder to cheat carbon tax. Don’t want to pay? Don’t pollute. There. Undoubtedly you’ll get scumbags who will still figure out ways to game even this simple system, but it won’t be as easy.
This is really good, Courtney. I’ve never been able to figure out what was behind ‘cap and trade’, thanks for breaking it down simple like.
[...] that improves energy efficiency and decarbonizes energy supplies. The authors claim the current “cap and trade” systems used by many countries, including the United States if Obama’s new climate bill [...]
If one does research beyond what is “spoon fed” to us by the media you will find that there is no actual “global warming” or a need for reduction is carbon emission. Climate change is a naturally occurring, cyclical event in nature. This newest Cap & Trade bill won’t do anything but create more unnecessary governmental control on business.