Essay on Cap and Trade

The industrial revolution began in the 17th century and made significant change in the world. An era was over and the new one was beginning. The revolution has advantages and disadvantages. Rising of living standards, improving of health, lifetime and trade system are its advantages. On the other hand, manufacturing has caused major problems such as deforestation, excessive use of fossil fuel sources, irresponsible industrialisation and agricultural development. These changes have increased world’s atmospheric concentration of water vapour, CO2, CH4 and other gases (Stocker, 2013). These gases capture part of energy receiving from sun and trap this heat inside atmosphere that causes rising temperatures on the earth’s surface. Naturally, for continuation of life these gases are necessary, but result of the human events these gases has produced more than plants and environment need (Robins, 2016). Also, we call them Green Houses Gases because they have the similar effect like the ‘greenhouses’ utilised to increase condition of vegetables.

Refer to the above table. Suppose the government commands each firm to reduce its emissions by 1 ton each and allows these two firms to trade pollution permits. If a 1-ton credit is sold for $175, the total cost for both companies combined to reduce emissions by a total of 2 tons could be as low as:

Improved air quality wasn’t a subject of national concern until the mid 1900s. After decades of coal burning, unregulated gas emissions from cars and the excessive burning of fossil fuels, people started noticing bad air quality as a hazard to their lives. Over several decades, after seeing the costly effects air pollution was having on the environment and people’s health, interest groups like the Friends of The Earth club and the influences of Theodore Roosevelt and Rachel Carson’s Silent Spring finally came together to persuade the government to enforce legislation that would reduce air pollution. Because of these efforts, the policies of the Clean Air Act of 1963 and the Motor Vehicle Pollution Control Act of 1965, that aimed to control air pollution and raise air quality standards, helped create the Environmental Protection Agency (EPA) on December 2, 1970. Since then, the EPA has passed more air quality improvement acts, and amendments to previous acts passed, to increase restrictions on air pollutants, with their main policy concern being the Clean Air Act. Improved air quality acts imposed by the EPA have been successful in cleaning the United States’ air quality by reducing ground-level ozone pollution and reducing emissions, allowing for a decrease in pollution related deaths/illnesses and a better standard of living. The EPA, through regulations and the Clean Air Act, has delivered it’s promise to improve air quality in the United States.

An added twist on the cap policy allows firms to trade emission allotments between themselves based on the buyer of allotment bargaining with the seller over the proper price to pay for the extra allotment. A two-panel diagram is needed to better understand the logic of trading emission allotments. Figure 4 illustrates the marginal cost of reducing emissions of two firms. One firm is run on older technology with high abatement costs that goes from right to left with zero costs represented at the lower right-hand corner of the diagram. The other firm has newer technology in its plant with lower abatement costs that goes left to right with zero costs represented at the lower left-hand corner of the diagram. The width of the horizontal axis is the reduction in emissions that must be achieved overall to an efficient level.

Carbon taxing coal-based products, in a revenue-neutral way, will help discourage overuse of fossil fuels. The United States needs to reduce carbon emissions in order to avoid the costs that pollution and climate change inflict on the general economy and individuals. Carbon, unlike other commodities exchanged and consumed in the free market, bears unique costs to the general economy that its market price does not encompass. The pollution we create when we consume carbon contaminates our air, raises temperatures, and makes severe weather events more frequent. A carbon tax is an economic mechanism that forces actors in a free market to come face-to-face with the social cost of

In order to examine and combat global warming, Senator Bernie Sanders and Barbara Boxer introduced the Global Warming Pollution Reduction Act of 2007 on Jan 15th, 2007. The act was proposed to increase performance abilities for electricity generation and motor vehicles with the choice in emissions “cap and trade” system. Unfortunately, the bill failed to pass committee in 2013. (Environmental Defense Fund, 2007)

A cap-and-trade program sets a maximum level of pollution, and distributes emission permits among firms that produce emissions (Carbon Tax, 2013). The purpose of which is regulation of specific emissions by stationary and mobile sources, and setting a specific level which all emitters are re-quired to meet. Cap-and-trade possibly has less of a direct economic component to it than the other alternatives to reducing emissions described due to the ability to trade permits versus the expendi-ture of resources improving technology, with some arguing it is to the detriment of the environment. As stated in the article found in Reclaiming the Environmental Agenda, by Ashford, N. et al., 2008, “being a market-based instrument, ‘the cap-and-trade option suggests that at least this form of MBI may be more environmentally effective than the usual command-and-control alternatives, in addition to being more economically efficient.” (Ashford, N. and Caldart, C., 2008, p. 908).

In 1997, The Kyoto Protocol was adopted to address climate change and reduce greenhouse gas emissions (EPA, n.d.). In spite of the international treaty, half of participating nations, including Canada failed to reducing its Co2 emissions (Clark, D., 2012, November 26).

There are many advantages and disadvantages when it comes to any system in regards to reducing the greenhouse gas emissions. If there is a legislation that seems like environmentally would be best, most likely it comes with a cost that sometimes may seem unsustainable. Just the same, there are advantages and disadvantages to the cap-and-trade system. As Steve Richey writes in his ‘Pros and Cons of Cap and Trade’ article. The major draw toward this program is its efficiency. Companies are able to reduce their emissions at a low cost, and sell emissions credits to companies who cannot. A certain number of credits are made available to purchase. This allows the option for environmentalist to purchase the credits and retire them, therefore decreasing the harmful effects of climate change. The disadvantages to the cap-and-trade system are that larger companies drawn to use coal, oil and gas have less of an incentive to switch to using

Cap and trade is a cost-effective method for reducing greenhouse gas emission/pollution. The amount of emissions that are produced by the economy (cap) is limited and allows those insured by the cap to trade amongst themselves (trade) in a flexible and cost-effective method/manner, creating a price on carbon pollution. The "cap" sets a maximum limit on the amount of greenhouse gas pollution that regulated emitters collectively can produce. Each year, the cap is lowered, requiring industry and other greenhouse gas polluters, such as natural gas distributors and other fuel suppliers, to reduce their emissions. The "trade" refers to a market where companies can buy or sell “allowances,” or pay others to reduce emissions on their behalf, in

First we should understand how the carbon cap and trade system came about. The system of carbon cap trade used to be known as ‘emissions trading’, the alliance of free-market republicans and renegade environmentalists got the system adopted as national law in 1990 as a part of the Clean Air Act, to control the power-plant pollutants that cause acid rain, which is triggered by vast clouds of sulfur dioxide

It is reported that nearly three quarters of green house gases are a result of humans burning fossil fuels from nonrenewable energy, cars, and electricity (LaMeaux, 2014). The effects of carbon emission on climate change are having devastating and many irreversible

The population on Earth is expanding rapidly which goes hand in hand in the degradation of the environment at large measures. The human’s appetites for needs are disarranging the environments natural equilibrium. Our production industries are venting smoke and discharging chemicals that are polluting our water. The smoke that is emitted into the atmosphere holds unappealing gases such as carbon monoxide and sulfur dioxide. The high

Government banned carbon trading schemes, creating demand for more fuel efficient aircraft as a way to save money (BBC, 2012).

Pollution, specifically global warming, is of growing concern to people and governments. It is a controversial issue whose validity is still being debated by scientists. The Kyoto Protocol is an international attempt to address global warming through emissions controls. Traditional neoclassical economic models do not incorporate pollution in rudimentary theories of supply, demand, or pricing, as a result, firms do not consider pollution as a cost of production, which leaves government regulation as the primary method for controlling these externalities. The goal of emissions trading is to allow one business, which can make greenhouse gas emission reductions for a relatively low cost, to sell