Is Cap & Trade the market-based answer to reduce greenhouse gases..??
Americans are a stubborn lot. We resist change and even the most minor of inconveniences. And I suspect the newly emerging ‘Cap & Trade’ schemes under the American Clean Energy & Security Act — also known as the Waxman-Markey bill — just passed in the House, and now being hotly debated in the Senate, will be no different. Cap & Trade is an environmental and energy-use policy tool that has delivered impressive results in other industrialized developed nations (See carbon emissions chart below) by mandating an annual global cap on emissions while providing market-based tools, resources and flexibility in how to comply. Successful Cap & Trade programs reward innovation, efficiency, and early action and, ideally, provide strict environmental accountability without inhibiting economic growth. Examples of successful cap and trade programs include the nationwide Acid Rain Program and the regional NOx Budget Trading Program in the Northeast. Additionally, the Environmental Protection Agency (EPA) issued the Clean Air Interstate Rule (CAIR) in March 2005, during the Bush administration, to build on the success of these programs and achieve significant additional emission reductions.
The concept of tradable carbon allowances for manufacturers, governments and corporation, though new to Americans, is not unfamiliar in most other developed nations, where carbon trade has proven successful. The idea is that manufacturers, corporations and governments — the largest end-users of carbon based energy — are allocated a fixed number of carbon units for the purchase of energy and fuel, but which can also be traded on an open market. All these entities receive an equal allocation initially, but those who use less can sell their excess credits to those who want or need more in a regulated Market. All this takes place in a framework where the total number of units is capped and regulated. And the economic principles for the consumption and utility of these carbon credits that will drive this newly emerging Cap & Trade Market is what I referred to earlier as ‘Carbonomics.’
But even more radically, with carbon trading by governments and corporations proving successful, and in order to reduce the ‘carbon footprint’ of individuals, in Britain they are now considering a personal carbon trading scheme that will give everyone a free, equal allowance of carbon units, which can be exchanged for carbon-dependent consumption credits and usage — say for oil, gas or electricity — or, it can be traded in a market, but whose overall goal is to drive carbon use down, ergo driving down exigent consequences such as global warming, air pollution and carbon-based energy dependence. The concept was first proposed in the mid 1990s, when it was largely ignored — and I was guilty of this — as utopian fantasy and untenable in ‘the real world.’ But it is now being taken seriously by the British, China and So. Korea, among others. In addition, there is a potential for a global carbon trading market, in which more efficient nations could trade credits with other less efficient countries, lending credence to the emergence of promising new frontiers.
2002 Carbon Emissions by Nation (Source: Oakridge National Labratory CO2 Emissions 2002)
If you’re interested about learning more about this topic, the Center for American Progress — a think-tank dedicated to improving the lives of Americans through progressive ideas and action for a strong, just and free America — has written an excellent primer on the topic titled: Cap & Trade 101. You can download a PDF version of that document here.
Read more about the ‘Ins & Outs of Cap & Trade’ here.
FAQs about the U.S. Climate bill here, courtesy the Miami Herald.
