What is Cap and Trade?
Cap and trade programs have largely been successful in reducing the emissions of pollutants that cause climate change. Its enactment came to place after growing concern over global warming and its irreversible damage to the environment and humanity. Many governments have intervened by introducing the carbon trading and the cap and trade program though, especially in the United States, they are still hotly debated among scientists, politicians and those in the energy industry. Consensus among scientists shows global warming is real, but the seriousness of the issue and whether or not humans are the cause of global warming are still debatable. Even among scientists, there is disagreement. Climatologists are unanimous in their belief that humans are the primary cause for the changing climate.
This leads to the question whether or not our preventative actions are enough to reduce the effects of global warming. Are we concerned enough as we should be? The cap and trade program is a step in the right direction towards building environmentally-conscious fuel industries. But can the cap and trade program meet its ambitious goal to reduce emissions by 80% in 2050? This site will have detailed information on cap and trade, the different programs that exist today in the U.S. and in the world and future programs that are being planned.
The site is intended to give an objective view of the impact of carbon trading from an environmental and business stand point. The science behind carbon emissions will also be explained. Also a discussion about how emissions are measured and regulated today will be here. Some of the concerns over existing carbon trading programs are also discussed such as the distribution of credits and offsets and whether or not cap and trade is promoting cleaner fuel technologies.
In short, cap and trade programs for carbon emissions is a market-based policy tool for protecting human health and the environment by controlling large amounts of emissions from a group of sources. The government initiates a cap and trade program by having Congress set a cap, or maximum limit, on all global warming emissions. The cap is intended to be lowered within a set time frame to achieve the eventual goal of lowering emissions. Sources such as electric utilities and oil refineries then receive authorizations to emit in the form of emissions allowances, with the total amount of allowances limited by the cap. These allowances are attained by initial auction or by trading from other sources in the form of carbon credits. A carbon credit is equivalent to a ton of carbon dioxide emissions or equivalent greenhouse gas. There are two distinct types of Carbon Credits: Carbon Offset Credits (COC’s) and Carbon Reduction Credits (CRC’s). Carbon Offset Credits consist of clean forms of energy production, wind, solar, hydro and biofuels. Carbon Reduction Credits consists of the collection and storage of Carbon from our atmosphere through biosequestration (reforestation, forestation), ocean and soil collection and storage efforts.
This market scheme encourages carbon-emitting industries to find cost effective ways to run their facilities. They will invest in low-carbon technologies, purchase allowances, and install pollution controls, etc. Each emission source must surrender allowances equal to its actual emissions in order to comply. Sources must also completely and accurately measure and report all emissions in a timely manner to guarantee that the overall cap is achieved.
As a summary, the cap and trade approach is best used when:
• the environmental and/or public health concern occurs over a relatively large area, or a significant number of sources are responsible for the problem. In other words, The cap should cover all major sources of emissions, either directly or indirectly. They include electric utilities, transportation, and energy-intensive industries, which together comprise some 80 percent of U.S. global warming pollution, as well as fossil fuel emissions from the agriculture, commercial and residential sectors.
• there are stringent caps set in the short-term which will build better success long-term.
• allowances are auctioned rather than given away free to emitters. An allowance auction allows the market to set the price of carbon, and it would be the most efficient and equitable way of distributing allowances. Giving away too many allowances will distort the market and profit polluters.
• the auctioned revenue is re-invested by the government in green and more energy efficient technology.
• accurate and consistent measurements of emissions, communication and accountability between scientists, policymakers, regulatory entities such as the EPA that monitor the emissions trading market. Strict monitoring and enforcement of standards for offsets will be necessary, and a trustworthy fiduciary entity must oversee the disbursement of the auction revenues from the sale of allowances.
• offsets, which are reductions of pollutants, meet rigorous standards to ensure the activities are permanently removing carbon from the atmosphere
• linking a domestic cap-and-trade regime with those in Europe and other regions that have adopted a stringent emissions cap. Doing so would require the U.S. program’s design to be compatible with these other regimes.
Under the right circumstances, cap and trade programs can be extremely effective, providing substantial emission reductions, complete accountability and unprecedented data quality and access. Existing cap and trade programs – the Acid Rain Program and the NOx Budget Program – have the force of federal and state standards behind them, including national health-based air quality standards. This ensures that local public health needs are met in conjunction with achievement of regional or national emission reductions.
A well-designed cap and trade program delivers:
• Greater environmental protection at lower cost
• Broad regional reductions, facilitating state efforts to address local impacts
• Early reductions, a result of allowance banking and market incentives
• Environmental integrity and transparent operations and results
• Fewer administrative costs to government and industry
• Efficiency and innovation incentives
• Incentives for doing better and consequences for doing worse
• Accounting for all emissions
• Partnership with existing requirements to ensure protection of the local population and environment
While there is no global or even national cap and trade program yet, the politics and science is slowly moving in that direction. Even if a program doesn’t get created, there will be some form of regulation on carbon gas in the the future.
