Cap & Trade

Proponents of cap-and-trade hope to harness the invisible hand of "the market" to reduce greenhouse gas emissions (GHG), such as carbon dioxide.

The goal is to "cap" current GHG emissions in the U.S. and then to reduce those emissions substantially by 2050 (70-80% reductions have been called for). Based on the amount of total allowable GHG emissions for the United States for a given year, the federal government would issue an as yet undetermined number of credits for carbon emissions to companies through an auction, by assignment, or by other means. Companies would be free to "trade" emission credits. In other words, companies with low emissions would sell excess credits to companies with high emissions and not enough credits.

The United States' experience with acid rain and the reduction of SO2 emissions, which causes it, is used as an example of a successful cap-and-trade program. Additionally, the experience is seen as an example of how to move away from command-and-control style pollution controls (like the Clean Air Act) by government setting a cap on the amount of allowable emissions and then permitting companies to find different ways to achieve the goal.

The need for cap-and-trade rests on the assumptions that 1) global warming is real and accelerating, 2) that global warming is caused by man-made GHG emissions, and 3) that global warming will have a destructive impact on the earth and humanity, with the potential to eliminate life as we know it.

Opponents of global warming alarmism naturally are opposed to cap-and-trade. More pragmatic opponents of cap-and-trade argue that the costs to the American economy will be excessive, if not destructive, and the impact on carbon emissions/global warming is negligible. Some of these opponents argue for a carbon tax instead of cap-and-trade.

Proponents of cap-and-trade admit that there will be high costs for the economy, particularly for lower and middle class households. They contend though that the government revenues raised by selling cap-and-trade credits to companies would offset the costs felt by most American families. In their plan, the federal government would redistribute cap-and-trade revenues 1) to lower and middle income families to offset rises in energy costs and 2) to "green" companies that would create new jobs developing new renewable and alternative energy sources. Opponents of cap-and-trade might label that a shell game.

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Quote Page

Quotes from experts, politicians, and economists on the effects of cap and trade policies on the United States long-term future.

Commentary or Blog Post

Exploring the difference of viewpoints for the cap and trade system, Michael Martine discusses a pro cap and trade viewpoint and an con cap and trade viewpoint.

After three years, the much ballyhooed cap-and-trade system in Europe is not working and that instead of reducing greenhouse gases that carbon dioxide emissions are actually increasing.

In Europe, energy prices have skyrocketed, economic competitiveness has drained away, many jobs have been lost and investment has gone elsewhere. Worse still, Europe's carbon emissions have increased.

The Clean Energy Jobs and American Power Act (S. 1733)—introduced by Senators John Kerry and Joseph Lieberman—would likely lead to the same conditions that caused the housing bubble of a few years ago.

A House-passed bill that targets climate change through a cap-and-trade system of pollution credits would slow the nation's economic growth slightly over the next few decades and would create 'significant' job losses ...

Current proposed legislation merely assumes we already have technologies allowing us to reduce CO2 emissions by 50 percent. These technologies, however, currently exist only in theory.

A committee chairman is threatening House leaders to either give him a role in shaping climate change legislation or risk losing every Democratic vote on his panel when the bill hits the floor.

The National Farmers Union noted during a visit to Wichita last week that a cap-and-trade emission system could be a boon to Kansas farmers if it allows them to sell emission credits.

"Of all of the world's chemical compounds, none has a worse reputation than carbon dioxide. Thanks to the single-minded demonization of this natural and essential atmospheric gas by advocates of government control of energy production, the conventional wisdom about carbon dioxide is that it is a dangerous pollutant. That's simply not the case. Contrary to what some would have us believe,...

As part of a public strategy to offset global warming, the president and Congress are considering possible 'cap and trade' laws to limit the United States' carbon dioxide emissions.

"On June 26, a 1,427-page climate change bill introduced by Representatives Henry Waxman (D-CA) and Edward Markey (D-MA) passed the House by a narrow margin. The bill, also known as Waxman-Markey, includes a number of alarming provisions, chief among them a cap-and-trade program that would attempt to curb global warming by imposing strict upper limits on the emission of six greenhouse gases,...

As the House of Representatives girds to debate the Waxman-Markey energy and global warming bill, no one seems to be asking the most important question: Just what is it for?

The administration of US President Barack Obama's cap-and-trade program in its fiscal 2010 budget proposal would have substantial impacts on the oil and gas industry.

Senate Majority Leader Harry Reid reached out to industrial-state lawmakers to ease concerns about proposed measures to cut climate-warming carbon emissions.

Chart or Graph

Cap and trade regulations will result in significant losses to GDP and to American households.

Cap and Trade proposal in the Obama Administration's Proposal is designed to raise the cost of using conventional energy....

The chart above illustrates "just how important coal is to generating electricity in the U.S. and North Dakota specifically."

CBO estimates that households in the lowest income quintile in 2020 would see an average gain in purchasing power of 0.7 percent of after-tax income, or about $125 measured at 2010 income levels.

This chart explains that implementing cap & trade through S. 2191 (Lieberman-Warner) will be very costly, even given the most generous assumptions.

The problems for our economy are increased by S. 2191's (Lieberman-Warner's cap & trade) reliance on complex and costly technologies that have yet to be developed.

We find that the cap-and-trade policy recommendations would have substantial negative effects by 2020.

California would bear the bulk of the economic losses, since it has the largest economy of the member states.

The graph demonstrates "the increase in electricity rates based on the assumption that a $20/metric ton tax on carbon emission would result in a 40 percent increase.

The market-based approach enshrined in the U.S. Acid Rain program has demonstrated that environmental protections need not compete with economic well-being.

Though the main focus for the emissions targets is CO2, Lieberman-Warner rules apply to six green­house gases: carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, perfluorocarbon, and some byproduct hydrofluorocarbons (HFCs).

Cap and trade was designed, tested and proven here in the United States, as a program within the 1990 Clean Air Act Amendments.

The Commission is concerned about President Obama's Cap and Trade plan because it would require citizens of states that are coal dependent to pay the most, without a targeted return of that money.

The graph above demonstrates "the increase in electricity rates based on the assumption that a $20/metric ton tax on carbon emission would result in a 40 percent increase."

The allowances created by Waxman-Markey to restrain CO2 emissions do not create economic value, which is another way of saying that the allowances do not improve the material well-being of Americans.

The legislation would increase unemployment levels for every year: 1.9 million fewer jobs in 2012, and an average of 1.14 million fewer jobs from 2012 through 2035.

The legislation would reduce the economy by no less than $120 billion in any year, with an average loss of $314 billion from 2012 to 2035 and cumulative losses exceeding $9.4 trillion.

Analysis Report White Paper

In this report we assess the economic and energy system implications of cap-and-trade proposals, not comparing particular bills in detail but studying synthetic versions that span their main features and illuminate the differences among them.

This essay examines the distributional effects of a 'cap-and-dividend' policy for reducing carbon emission in the United States: a policy that auctions carbon permits and rebates the revenue to the public on an equal per capita basis.

"A favorite approach to reducing carbon dioxide emissions among Washington bureaucrats is the 'market-oriented' cap-and-trade program, which under a global warming bill proposed by Representatives Henry Waxman (D-CA) and Ed Markey (D-MA), would establish."

This report includes a summary of the key findings, data regarding costs to consumers, energy statistics, a discussion of revenue generated from carbon legislation, and recommendations.

Policymakers and businesses are now trying to figure out the best way to limit the emissions of greenhouse gases, especially carbon dioxide, which is produced by burning fossil fuels such as coal, oil, and natural gas.

CRA has prepared this report on behalf of Partners for Affordable Energy and a coalition of industry associations and utilities to evaluate the economic impacts associated with implementation of a Midwest regional climate policy (RCP).

The study examined the Cap and Trade policy described in the 2010 Budget Proposal, including the stated caps on U.S. greenhouse gas emissions and proposals for use of the revenues to fund renewable energy programs.

This booklet was written for busy state elected officials who need to stay well-informed about the energy debate. It covers 10 of the most important energy issues facing the country, with each section ending with recommended actions and suggested readings. A thorough bibliography appears at the end of the booklet.

This paper summarizes various estimates of the costs of mitigation of adverse impact of the climate change via cap-and-trade.

An essay examining the economic impact of the Western Climate Initiative's regional Cap-and-Trade program.

Since energy is the lifeblood of the American economy, 85 percent of which comes from CO2-emitting fossil fuels, the Waxman-Markey bill represents an extraordinary level of economic interference by the federal government.

Our analysis makes clear that S. 2191 promises extraordinary perils for the American economy.


Christopher Horner discusses the economic and political incentives behind support for cap and trade legislation, and the reasons why it would be ineffective.

FOX Business experts break down how a carbon tax will change the energy sector.

Author of Carbon Folly, Donn Dears clarifies the relationship between oil and electricity. His YouTube channel includes short videos on the likelihood of other energy sources such as biofuels, wind and natural gas to supply our energy needs, and on the feasibility of cap and trade.

Few topics generate more heat than global warming and possible policy solutions to increases in the average global temperatures. Indeed, the options bandied about range from doing nothing to applying planet-wide restrictions on all aspects of energy consumption and technology.

A dedicated, unabashed, free market capitalist, T. J. Rodgers takes a businessman's and engineer's view of global warming.

"Competitive Enterprise Institute Senior Fellow Marlo Lewis explains the truth about global warming in his film Policy Peril: Why Global Warming Policies Are More Dangerous Than Global Warming Itself. The movie includes cameos from Heritage’s Ben Lieberman and David Kreuzter and is full of talking points to debunk the common catastrophic global warming stories you always hear."

Primary Document

On December 2, 2009, Congressman Tim Holden ... held a hearing to review economic analyses that consider the potential economic impacts of climate change on the farm sector.

The implications of this cap-and-trade are devastating for the American people and for the American refining and petrochemical industries.

The economic impacts of climate change on the farm sector are broad, complex and will evolve slowly over the next decades.

Under a cap-and-trade program, firms would not ultimately bear most of the costs of the allowances but instead would pass them along to their customers in the form of higher prices. Such price increases would stem from the restriction on emissions.

Global climate change poses one of the nation’s most significant long-term policy challenges.




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