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 manufacturing. To understand cap and trade, think of it as a system designed 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
Cap and trade and its definition
The cap and trade definition in the climate and energy bill proposes that the government needs to be setting a limit on the amount of carbon that could be released into the atmosphere. US companies are given permits allowing them to release certain amounts of carbon. If companies use less carbon, they can sell unused carbon on the open market. Companies with carbon emissions that exceed their permits must buy them from cleaner companies offering their leftovers for sale.
Cap and trade and national energy policy
Cap and trade appears to be a very controversial provision that threatens to derail the climate and energy bill in its present form. When Democrats think it is a fair way to regulate pollution, Republicans say cap and trade is a tax on business that will kill jobs. With the advent of the oil spill in the Gulf of Mexico and its impact it will have on national energy policy, cap and trade has become a political hot potato. So much so that President Obama avoided even the slightest mention of 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
Carbon emissions targets are nearly identical in both Senate and House versions of the climate and energy bill. PBS reports that regulated industries must reduce their carbon emissions by 17 percent (when it is being 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 generated by trading the pollution permits back to consumers in the form of energy rebates. Those regulated industries are able to contain 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 a lot more costly for anybody to ever use. The parties disagree on how expense this could be. The U.S. Department of Treasury says the new taxes would have to be between $100 billion to $200 billion a year.
Costs of cap and trade
At the upper end of the administration’s estimate, the cost of cap and trade per American household would probably be an extra $1,761 a year. 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
Priorities is what cap and trade boils down to. Some see the issue only in black and white: either reduce the rate of global warming, or protect a fragile economy. Cap and trade won't be that simple as numerous things aren't. Ecomil.com reports that climate and energy legislation can reduce carbon dioxide by a lot more than 80 percent of 2005 emission levels by 2050, and this may also be able to significantly reduce the rate of global warming. The system plans to create billions of dollars for the government to spend on roads, national parks and personal checks to offset household energy costs.
Catch up with China
What numerous fear about cap and trade is that if businesses and corporations are punished for their pollution emissions, consumers will pay the price. Supply and demand isn't something energy responds to. Prices might go up by utility companies to cover production costs. Meanwhile, countries like China are actually investing in clean energy industries of the future, while Americans sit around arguing about things like cap and trade. No solution is going to be 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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