Cap and Trade for Carbon Emissions

The original article here is by Kevin Drumm.

“As nasa climatologist James Hansen has warned, we are nearing—if we haven’t already passed—the tipping point at which the concentration of carbon in the atmosphere becomes so high that feedback loops will cause it to keep increasing on its own even if humans never emit another CO2 molecule again.”

While it doesn’t sound radically different from similar schemes already in effect, the cap and trade system is a way to introduce competitive market forces into the arena of enticing companies to reduce their carbon emissions.  The premise is that if company B can produce energy for a much lower cost than company A, then company A will make profit by selling carbon permits to company B instead of producing power (and hence carbon emissions) themselves.  The result is that the same product output is generated (company B does twice the work), but much less emissions are released into the atmosphere.  Both companies see a profit, company A through the sale of their carbon permits, and company B through the sale of more power or other carbon-producing product.  It sounds odd, but the model has shown itself effective in practice.

“…in 1990, when the Clean Air Act was modified to address acid rain pollution caused by sulfur dioxide from coal-fired power plants. Instead of requiring every plant to install a specific cleanup technology or meet a specific emission rate, the epa simply set a nationwide cap on the total volume of SO2 emissions and required power plants to own a permit for each ton of SO2 they emitted. Each plant was allocated a certain number of permits, and if a plant reduced its emissions to the point where it didn’t need all its permits, it could sell them to the highest bidder. The results were better than anyone expected. According to figures collected by the Environmental Defense Fund, power plants regulated under the Clean Air Act didn’t just meet the cap but ended up with about 20 percent lower emissions overall—at about one-third the cost estimated before the law’s passage.”

Cap and trade certain isn’t a complete solution for lowering carbon emissions and correcting our climate, other measures are still necessary and we have an incredible task ahead.  However, it is a promising start to initiatives that will help lower our overall environmental footprint by offering a program to companies that gives them a market based incentive to improve.

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