Why is cap and trade good

When emissions become cheaper than expected, which may occur in situations when an economic downturn occurs that can cause them to fall, then a carbon tax is a superior option because it provides a continuing price signal to agencies.

The final cost with a tax encourages ongoing emission reduction, whereas a cap and trade system will only encourage reductions to the mandated target levels. Although that means you can schedule a specific set of targets that can cause carbon levels to decline over time, there is no way to encourage a faster response to this process.

It will always be effective, but it may not always be as impactful as it could be during changing economic times. Trade systems require a value cost to be effective. In a standard cap and trade system, organizations have several different ways that they can obtain extra credits when they are necessary. There are times when the government decides to give them away to firms in a manner that is similar to a tax break.

When businesses know that they can receive leniency in this system, then there is no incentive to change. The only way to counter disadvantages like this one is to create a structured system which allows for zero exceptions. Without this line in the sand, the extra pollution can actually harm the economy because it costs more to clean up the mess. The government ultimately dictates how many credits are available. The government has the power in a cap and trade system to retire credits at their leisure.

It is possible for them to cancel credits after issuance if an auction system was not used, denying the organization an opportunity to use them after receipt. This disadvantage creates the potential for retaliatory politics, especially in two-party systems like the United States.

The Trump Administration recently announced an idea that would allow for the resettlement of illegal immigrants crossing the border to sanctuary cities as a response to Democratic opposition to border policies.

Take that concept, and then apply it to the rewarding or denial of emissions credits based on their support of government actions.

Emissions credits can be artificially high or low. Because the cap and trade system works with free market principles, anyone can decide to purchase emissions credits if they have the financial means to do so. It can also be a way to artificially change the price of each trade since there would be fewer available on the market. Artificial scarcity can drive up the price of all items in society, even if the ends justify the means by saving the environment.

Those without a bevy of financial resources available to them would be unable to cope with these changes. There is no consistency available unless a global cap and trade system is available. The only way that cap and trade systems work on a global scale is if every country participates in programs that work within the same context and framework. When one nation permits higher levels of pollution than another, then there may be little impact on the number of greenhouse gas emissions that spill out into the atmosphere every year.

Some societies may decide to be very strict, while others might offer leniency to ensure there is more compliance before trying to reduce the amount of carbon dioxide being produced.

The cost of implementation would be very high in the United States. A cap and trade plan for the United States would eventually force the energy industry to either retrofit or decommission many of the structures we currently use to generate power. The cap and trade system is one of the most efficient ways to reduce greenhouse gases without creating an adverse impact on the overall economy.

We must have legislation in place that creates strict limits on the amount of pollution allowable in society. There must also be strict penalties in place for the agencies who choose to stay out of compliance. The costs of doing business outside of the maximum cap must be higher than what they are for compliance for this system to work.

Evidence from existing cap and trade systems show that immediate results are possible. The pros and cons of cap and trade suggest that this system is imperfect in some ways.

There will always be outliers who try to get away with bending or breaking the rules. This system is also one that rewards innovation, encourages free market principles, and can work quickly to reduce the impact of carbon dioxide and other greenhouse gases on our environment.

It is a necessary step that we can take for future generations. List of the Pros of Cap and Trade 1. List of the Cons of Cap and Trade 1. An Interesting Thought on the Pros and Cons of Cap and Trade The cap and trade system is one of the most efficient ways to reduce greenhouse gases without creating an adverse impact on the overall economy.

Share Pin Tweet. She received her B. In addition to being a seasoned writer, Louise has almost a decade of experience in Banking and Finance. The new government also plans to attack carbon pricing at the federal level. Scientists and economists tell us it makes sense. In , the editors of Scientific American wrote that the U.

Imagine if it summoned this passion to fight things that hurt people — drought and flooding, for example — rather than something that helps them. This op-ed was originally published in the Star. Always grounded in sound evidence, the David Suzuki Foundation empowers people to take action in their communities on the environmental challenges we collectively face. And it is imperfect -- just like any legislation that contains the compromises necessary to get it passed.

But a focus on the flaws completely misses what a monumental shift the Waxman-Markey bill would set into motion. Cap-and-trade succeeded in the acid rain case because it fundamentally restructured the incentives faced by industry: companies could no longer freely pollute the atmosphere, so they figured out new ways of producing electricity with less pollution.

A cap-and-trade system for carbon dioxide and other greenhouse gases -- pervasive throughout our economy -- will restructure incentives on a much grander scale -- tipping the balance toward low-carbon, high-efficiency technologies, and rewarding entrepreneurs and innovators who develop the next generation of clean technologies. In contrast to the success of cap and trade in addressing acid rain, the federal government has never used a tax to control a large-scale pollution problem.

The window of opportunity to avoid a dangerous warming is closing fast. We can't afford the time to tinker with a tax. Let's rely on a proven approach, and cap greenhouse gases. News U. Politics Joe Biden Congress Extremism. Special Projects Highline. HuffPost Personal Video Horoscopes.

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