he carbon pricing proposal left to discuss is the cap-and-trade system. Cap-and-trade places strict limits on fossil fuel use for industries and other sources of greenhouse gasses, and creates rewards for those industries who cut their emissions. Caps are already being used in the European Union and in a number of American states, with greater support overall than a carbon tax system. “The bottom line is that cap-and-trade gives us an affordable environmental guarantee that you can’t get with a tax. The dime a day we’ll spend is the hardest working dime in America: It cleans the air, reduces our oil dependence, creates jobs, and averts a looming environmental crisis.” This is a statement by Fred Krupp, President of the Environmental Defense Fund. Krupp also explains how the rewarding system of cap-and-trade will strengthen the economy and drive investment into sustainable jobs and technologies. Caps are different than traditional regulations, as explained by Eileen Claussen, President of the Pew Center on Global Climate Change. “A cap-and-trade program constraints emissions but lets market forces set a price on emissions. Rather than mandating a specific technology, the flexibility afforded by emissions trading markets helps identify where emission reductions can be achieved most cost-effectively.” An economy-wide cap-and-trade policy has garnered far more attention and more supporters including President Obama, Congressional leaders, NGOs, and larger corporations. There are differences between both proposals and it is difficult to put one ahead of the other, but what is certain is that both are better than the do-nothing status quo.
Cap and trade system in 60 seconds || FT World