How Does Cap And Trade System Work?

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Cap-and-trade is environmentally and economically approach to capping and controlling greenhouse gas emissions which is the primary cause of global warming. It is a policy move aimed at controlling large amounts of gas emissions from a cluster of sources. This approach sets an overall cap which is the maximum amount of gas emissions per a stipulated compliance period, for all the sources under that particular program.

The cap puts a limit on gas emissions which from time to time is lowered to reduce and control the amount of toxins released by pollutants into the atmosphere.

The trade, on the other hand, builds a ready market for carbon permits helping industries and companies and factories to innovate so that they can meet their allocated emission limit. The more these factories emit the more they pay and vice-versa. This therefore acts as an incentive for the companies to pollute less.

How Does Cap and Trade System Work?

A cap puts a maximum tolerable level of pollution and makes companies that go beyond this limit to pay. This is a sure way of guaranteeing lower emissions. The cap is usually measured in billions of tons of carbon dioxide per year. It covers economy wide emissions including natural gas generation, electricity generation, large manufacturers and transportation. Emitters are only allowed to release a set limit of pollution. Permits are issued to emitters and operating without a permit is against the law.

How Does One Get The Permit?


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