Cap and trade, by definition, is an anchor of the current climate and energy bill under debate in Congress. The cap and trade definition is elusive to most people not directly involved in utilities, petrochemicals or the manufacturing business. To understand cap and trade, think of it as a system intended to create and regulate a market for carbon, or Co2, the principal greenhouse gas.
Resource for this article: Cap and trade definition threatens passage of climate change bill By Personal Money Store
Definition of cap and trade
The cap and trade definition in the climate and energy bill proposes that the government sets a limit on the amount of carbon that can be released into the atmosphere by all of the companies. US companies can release certain amounts of carbon with permits that are given. Companies can sell unused carbon on the open market if they use less carbon than their permits allow. Companies with carbon emissions that exceed their permits must purchase them from all of the other companies that are offering their leftovers for sale.
National energy policy and cap and trade
Cap and trade seems to be a very controversial provision that threatens to derail the climate and energy bill in its present form. While Democrats view cap and trade as a fair way to regulate pollution, Republicans say that this cap and trade is just a tax on business that will kill jobs. With the advent of the oil spill within the Gulf of Mexico and its impact it can have on national energy policy, cap and trade has become a political hot potato. So much so that President Obama avoided mentioning the term in his Oval Office speech about national energy policy Tuesday covering the oil spill, energy legislation and also the government’s role in regulating greenhouse gases.
Carbon emissions limit
Seems like that in both versions of the climate bill, carbon emission targets are identical. PBS reports that regulated industries must reduce their carbon emissions by 17 percent (in contrast to 2005 levels) by 2020 and 83 percent by 2050. The Senate version has added a “dividend,” or rebate, approach returning some of the revenue that has been generated by trading the pollution permits back to consumers within the form of energy rebates. Those industries consist of electric utilities, petrochemical refiners, manufacturing and heavy industry. Each has a very strict deadline for entering the carbon market: utilities start at the beginning of 2013, while natural gas providers and heavy industry enter in 2016.
Cap and trade with various arguments
Cap and trade legislation has generated bitter disagreements between Democrats and Republicans over the climate and energy bill. CBS News reports that cap and trade makes the future of the climate and energy bill uncertain because it will make energy more costly. Both parties acknowledge that fact but disagree on just how costly energy will get because of the bill. The U.S. Department of Treasury says the new taxes would have to be between $100 billion to $200 billion a year.
Cap and trade costs
The cost of cap and trade per American household would be an additional $1,761 a year. House Republican Leader John Boehner has estimated the additional tax bill would be at $366 billion a year, or $3,100 a year per family. Personal income tax revenues bring in around $1.37 trillion a year. A $200 billion additional tax would be just like a 15 percent personal tax increase a year.
Benefits of cap and trade
Cap and trade is about priorities. Some see the issue only in black and white: either reduce the rate of global warming, or protect a fragile economy. Cap and trade can't be that simple. Ecomil.com reports that climate and energy legislation can reduce carbon dioxide by more than 80 percent of 2005 emission levels by 2050, and this may also be able to substantially reduce the rate of global warming. The system will also create billions of dollars for the government to spend on things they want such as roads, national parks and personal checks to offset household energy costs.
Trying to catch up with China
What numerous fear about cap and trade is that if businesses and corporations are financially punished for their pollution emissions, consumers are likely to pay the price. Energy just won't respond to supply and demand. To cover production costs, utility companies might drive up prices. Meanwhile, countries like China are getting clean energy industries of the future, while Americans sit around arguing about things like cap and trade. No solution is ever perfect, given that any House or Senate bill is full of special-interest goodies and public giveaways to win votes. Well at least it's a good start.
Read more on this topic here
PBS
pbs.org/frontlineworld/stories/carbonwatch/2010/06/the-american-power-act-cap-and-trade-20.html
CBS News
cbsnews.com/8301-504383_162-5314040-504383.html
ecomil.com
ecomii.com/ecopedia/cap-and-trade
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