As Congress weighs imposing a mandatory limit on climate-altering gases — an outcome still far from certain — it is likely to turn to a system that sets a government ceiling on total emissions and allows polluting industries to buy and sell permits to meet it.
(snip)
But not long ago, many of today’s supporters dismissed the idea of tradable emissions permits as an industry-inspired Republican scheme to avoid the real costs of cutting air pollution. The right answer, they said, was strict government regulation, state-of-the-art technology and a federal tax on every ton of harmful emissions.
(snip)
If there was a single moment when cap and trade crossed the threshold from relatively untested economic concept to prevailing government policy, it came in May 1989 in the West Wing office of C. Boyden Gray, counsel to President George H. W. Bush. Mr. Gray had gathered a number of Mr. Bush’s economic and environmental advisers to try to come up with a politically palatable plan to break a decade-long deadlock on the problem of acid rain, caused by sulfur dioxide emissions from coal-burning power plants in the Midwest.
(snip)
A month later, the Bush White House sent Congress a cap-and-trade plan for sulfur dioxide emissions that 18 months later became the linchpin of the 1990 amendments to the Clean Air Act, considered by many to be the most successful domestic environmental legislation ever enacted.
http://www.nytimes.com/2009/05/17/us/politics/17cap.html?_r=1&pagewanted=all-------------------------------------
Most of the folks bashing cap & trade don't seem to understand why it's popular with industry AND environmentalists. Cap & trade lets the market find ways to cut back on greenhouse gas emissions (or other pollutants), which winds up accomplishing the same goals as command and control at a reduced cost to industry.
Let's give an example: Say there are two factories owned by the same company, one in Washington state and one in West Virginia. Both factories have boilers powered by fossil fuels that spew out 10,000 tons of carbon dioxide a year each, for a combined total of 20,000 tons per year. The EPA has decided that they only want 10,000 tons of CO2 to be released from these two factories put together.
The EPA can go in and mandate that each factory cut their CO2 emissions in half. Let's say both factories could perform equipment upgrades to achieve this goal, but the factory in West Virginia would need $1,000 in upgrades per ton of reduced CO2 emissions while the factory in Washington would only need $500 to accomplish the same reduction. So the West Virginia factory is spending $10 million to update their factory to meet the new emissions goals while the Washington factory is only spending $5 million to achieve the same result. $15 million dollars total have been spent by this company to halve the emissions from the two factories.
Under a cap & trade system, the EPA could allot 10,000 carbon credits for each factory. If the company shifts all the credits to the West Virginia factory (assuming this is legal), then puts money towards ratcheting the emissions of the Washington factory back to nothing (hey, maybe there's geothermal or something), $10 million dollars total has been spent to halve emissions from the two factories, saving the company $5 million over what they would have spent under a command and control system. When a different company comes looking to buy carbon credits for $1,010 a pop, then the West Virginia factory will get its upgrades.
One of the beautiful things about cap & trade is that these markets are open to everyone. If you want to buy a credit and take it out of the hands of polluters, you totally can.
In summary, cap & trade offers a lot of promise, and I think many here are too quick to dismiss it.
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