Cap and trade, by definition, is an anchor of the climate and energy bill under current debate in Congress. The cap and trade definition is elusive to most people not directly involved in utilities, petrochemicals or the manufacturing business. To understand cap and trade, think of it as a system intended to create and regulate a market for carbon, or Co2, which is really the principal greenhouse gas.
Article Resource: Cap and trade definition threatens passage of climate change bill By Personal Money Store
Cap and trade definition
The cap and trade definition within the climate and energy bill proposes the government sets a limit on the amount of carbon that could be released to the atmosphere by all of the companies. US companies are given permits allowing them to release certain amounts of carbon. Companies that emit less carbon than their permits allow can sell the unused tons of carbon on the open market. Companies with carbon emissions that exceed their permits must buy them from all of the other companies that are offering their leftovers for sale.
Cap and trade and national energy policy
Cap and trade is a controversial provision that threatens to derail the climate and energy bill if it doesn't change. While Democrats view cap and trade as 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 potential impact on national energy policy, cap and trade has become a political hot potato. So much so that President Obama avoided mentioning the term in his Oval Office speech about national energy policy that he gave on Tuesday covering the oil spill, energy legislation and also the government’s role in regulating greenhouse gases.
New limits on carbon emissions
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 that has been generated by trading the pollution permits back to consumers within the form of energy rebates. Those industries contain electric utilities, petrochemical refiners, manufacturing and heavy industry. Each has a deadline for entering the carbon market: utilities start at the beginning of 2013, when natural gas providers and heavy industry enter in 2016.
Arguments on cap and trade
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. Both parties acknowledge that fact but disagree on just how expensive energy will get because of the bill. 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 additional $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. $1.37 trillion a year would be brought in with personal income tax. A $200 billion additional tax would be just like a 15 percent personal tax increase a year.
Benefits of cap and trade
Cap and trade is about priorities. Some see the issue in black and white: either we can reduce the rate of global warming, or protect a fragile economy. Cap and trade won't be that simple as many things aren't. Ecomil.com reports that climate and energy legislation can reduce carbon dioxide by at least 80 percent if not more of 2005 emission levels by 2050 and significantly reduce the rate of global warming. The system will even create billions of dollars for the government to spend on things they want like 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. Energy doesn’t respond to supply and demand. Utility companies can drive up prices to cover rising production costs. Meanwhile, countries like China are investing in clean energy industries of the future, when 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. It's a good start to begin with.
Citations
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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