Today on Planet 100: Cap and Trade Explained (Video)
Get the who, why, how, when, and where: Planet 100 presents everything you ever wanted to know about Cap and Trade.What?
What exactly is cap and trade? Simply put, it's government's attempt to put a limit on the total amount of pollution emitted into the atmosphere.
And when we talk about pollutants we're mainly talking about carbon dioxide which, as we all know, has a detrimental effect on the environment.
So how does a cap and trade system work? Well the government first sets a cap, deciding how much pollution in total will be allowed.
Next, companies are issued credits, which are essentially licenses to pollute, based on how large they are, what industries they work in, and so on. If a company comes in below its cap, it has extra credits, which it can trade with other companies.
What's good about it? Well for companies who come in below their caps, a cap and trade system is great, because they can sell their extra credits, profiting while reducing their pollution.
For over polluting companies, a cap and trade system penalizes them for their excess pollution while still bringing overall pollution rates down. Having to purchase credits acts as a fine, which encourages them to reduce their emissions.
What's bad about it? A lot of criticism has been at lobbed at the cap and trade scheme mainly from environmentalists and economists.
Arguments include the unjust financial advantages granted to major polluters by issuing free permits (although auctioning permits may solve this particular conundrum), the ability to cheat in connection with carbon offsets, and that cap and trade distracts us from the search for other pollution quashing solutions.
Finally, do we have history of cap and trade here in US? Yes. The 1990 Clean Air Act used a cap and trade scheme to help control Acid Rain.
Under this program, sulfur dioxide emissions were reduced by 50% from 1980 levels by 2000 with some experts arguing that the cap and trade system reduced the cost of controlling acid rain by as much as 80%.