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12 Cap and Trade Pros and Cons

The RGGI has already begun auctioning carbon emission credits, and the next auction is scheduled for December 1, By gradually decreasing the maximum level of emissions, long-term goals to reduce emissions can be met. By continuing to use this website, you agree to their use. Leave a Reply Cancel reply Enter your comment here Schwarzenegger and others sign the WCI agreement. Fill in your details below or click an icon to log in:

The income from credits can help to make this happen, even when a cap is in place. This income can be supplemented with carbon taxes in place that work with the cap trade system. 5. The average person can create change. The cap trade system creates a new knowledge base for consumers because certain products may not be in compliance with the laws.

The income from credits can help to make this happen, even when a cap is in place. This income can be supplemented with carbon taxes in place that work with the cap trade system. The average person can create change. The cap trade system creates a new knowledge base for consumers because certain products may not be in compliance with the laws. Consumers can then choose whether or not to purchase from businesses who choose to remain out of compliance or attempt to cheat the system.

This gives the average person the ability to start a positive change because they ultimately control the purse strings. Many of the emissions credits are just given away. Businesses have a number of ways that they can gain extra emissions credits. Sometimes these credits are just given away, creating no trade benefit at all. This means it costs a business nothing to expand their emissions and that can harm a local economy, which receives no economic gain in return.

The government can retire emissions credits. Because every business has access to emissions credits, it means that the government also has access to them because they also have an economic impact on society. What makes the government different than a business when an emissions credit is received is that the credit can be canceled and removed from circulation. Some credits are artificially high in price. Many environmental agencies have also discovered that they can purchase these credits and choose not to use them.

They may not have the authority to officially retire the credits, but they can hold onto them indefinitely and create the same type of result. This means when credits are traded as intended, their price may be artificially high.

The emissions credits are almost always cheaper than converting to friendlier resources. For industries that use fossil fuels, the cost of converting to more renewable resources can be very high. The emissions credits, offsets, and even penalties and fines for exceeding a cap limit are all cheaper than going through a conversion to a new source of energy.

This means there is no real incentive for those industries to change their practices. It is relatively easy to cheat the system. This makes it very easy for the average business to cheat on their emissions reports if they are so inclined.

For the cap trade system to be effective, some sort of time frame monitoring must be implemented so that enforcement can take place. It would create higher prices for goods and services. Renewable energy resources are still relatively new, which means they are relatively expensive. For industries that do transition into lower emissions and follow cap rules, there is a good chance that the products that they produce are going to be more expensive in the future.

Unlike traditional regulation, cap and trade constrains emissions while letting market forces set a price on them, helping to minimize the cost of making substantial reductions in those emissions.

Rather than mandating a specific technology, the flexibility afforded by emission trading markets helps identify where emission reductions can be achieved most cost effectively.

Cap and trade stimulates the development of new technological solutions that can enable much deeper cuts at lower cost in the future—technologies that regulators simply cannot anticipate. Furthermore, emission trading programs can be designed to cover a wide variety of emission sources and sectors, and serve as the core of an economy-wide GHG reduction program.

Despite its strengths, cap and trade alone cannot achieve the GHG emissions cuts necessary to address climate change. However, combined with other regulatory measures and incentives, it can be a key part of the solution. In order to achieve the necessary reductions, certain technologies may need to be targeted by specific supportive policies in order to reach their potential, and some sources of emissions may not be easily covered through cap and trade.

A solution to climate change will require a comprehensive approach, combining market mechanisms with more traditional standards and incentives. Ultimately, cap-and-trade programs offer opportunities for the most cost-effective emissions reductions.

Deciding on the most equitable method of initial allowance distribution, what trading rules should be, and other design features is challenging. Once established though, a well-designed cap-and-trade market is relatively easy to implement, can achieve emissions reductions goals in a cost-effective manner, and drives low-greenhouse gas innovation. You are commenting using your WordPress.

In the end, a comprehensive summary will arrive at the conclusion that cap and trade may be the best option for reducing greenhouse gas emissions, given the high cost of alternatives, the efficiency of the cap and trade system, and the success of this system in the past. An economy wide cap-and-trade system that limits carbon emissions, or the levying of a fee for carbon emissions, would harness market forces to find the least cost means to reduce carbon emissions. Nov 03,  · The Benefits of Cap and Trade Se below (Photo credit: Wikipedia) Cap-and-trade programs offer significant advantages over traditional regulatory policies, particularly in the effort to address climate change.