Cap & Trade
Concerns about global warming are fostering creative strategies for reducing our emissions of heat-trapping gases such as carbon dioxide (CO2). The most well-known approach, the Kyoto Protocol, came into force this past February, though without U.S. participation. As an alternative, several American policy makers have put forth emission reduction policies including the federal Climate Stewardship Act and the Regional Greenhouse Gas Initiative, an effort undertaken by the governors of nine northeastern states to reduce carbon emissions from power plants. A common feature among these climate strategies is a “cap-and-trade” system for reducing emissions.These systems draw on the power of the marketplace to reduce emissions in a cost-effective and flexible manner. In practice, cap-and-trade systems create a financial incentive for emission reductions by assigning a cost to polluting. First, an environmental regulator establishes a “cap” that limits emissions from a designated group of polluters, such as power plants, to a level lower than their current emissions. The emissions allowed under the new cap are then divided up into individual permits—usually equal to one ton of pollution—that represent the right to emit that amount
