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What is the US Cap and Trade System?


In an article written by Alter Toronto on May 12, 2009 at, it indicates that “76% of Americans Have no Idea What Cap and Trade System is.” The claim is based on Rasmussen’s Reports  pool survey result conducted on May 7-8, 2009 entitled Cap & Trade I.

Last May 21, 2009, the controversial US Cap and Trade System was approved by the House of Committee with a 33 to 25 vote in favor of the Democrats. The bill has been controversial as many opposing parties and individuals claim that the bill will cause additional expense on every US citizen. The poll survey result gives a clear indication of the citizen’s lack of awareness on the cause and effect of the bill.

What is the US CAP and Trade System? Bill? What environmental concerns does it address? What are the implications of the passage of the bill to companies and to ordinary citizens?

Cap and trade system requires companies engaged in carbon dioxide greenhouse gases emissions to trade their emission allowances or also referred to as pollutant credits under a specified limit (cap) by the government. Basically, a corporation will be given or need to obtain emission allowance in order to emit pollutants in the air. Over the decades to come, the emission allowance will become lesser and thus, emissions will also decrease in the process. The bill was borne out of the purpose to gradually reduce the pollutant emissions in the United States. This is just one of the government measures to address the imminent danger of the noticeable effects of global warming over the past years and decades.

Pollution allowances. As mentioned above, companies need to acquire emission allowances in order to continually use dirty energy in their operations. The bill was originally designed to auction half of the allowances to companies. The other half is supposedly designed for free distribution depending on companies’ current emissions. President Barack Obama has advocated this idea during his presidential campaign with all emission allowances fully auctioned by the government. The pollution credits were supposedly tradable by the recipient at their own discretion. The process of auctioning pollution credits would naturally result to generated funds that initially Pres. Obama has planned to give back to citizens.

However, the actual bill passed allows the government to give away 85% of the emission allowances with only 15% left for auctions. Supporters of the bill claim that this is necessary in order to win support of companies that are using a lot of dirty energy for many years. The only problem is there will be no money generated out of the process. Thus, there is nothing to give back to citizens. In fact, the citizens will carry the cost of this bill which is supposedly geared towards the greater cause. As companies gradually stop using destructive equipment or system in their operations, they will have to resort to greener measures. The cost of shifting to these methods will cause a company enough expense to pass on to consumers.

With the passage of the US CAP and Trade System bill, there are many uncertainties exposed in the eyes of opposing parties. The bill is a historical event for many individuals and organizations as it is the first and only approved bill to date that addresses climate change in the United States. On May 21, 2009, the bill was formally made official with a 35 to 25 vote in favor of the Democrats. The bill aims to gradually reduce companies’ usage and consumption of fossil fuels. The objective is to encourage companies to convert their dirty energy consumption into renewable energy e.g. solar and wind power and the like.

In the previous news article, the advantage and disadvantage of pollutant credits on the part of consumers and companies was discussed (link to previous article). The bill allows 85% of the pollutant credit given away by the government to companies. With this, the consumers are said to be the ones to shoulder the cost of this bill. Companies would naturally pass on the cost of going green or reduction of emission to its consumers.

Here we delve further into another scenario brought about by the bills’ passage and impending implementation.

Gas emissions contribute significantly to global warming. The bill intends to reduce and possibly eliminate use of fossil fuels over time. The government predicts that by 2020, the bill should be able to reduce greenhouse gas emissions by 17% through actions undertaken by the government and companies concerned. By 2050, the government intends to reduce emissions by 83%. The government’s intention is definitely justifiable. This would actually serve as an example for many industrialized countries to follow in response to the disastrous calamities that seem to wreck a lot of countries economic condition in more frequent and worsening episodes.

This bill is regarded as proactive and preventive. However, there are two contentions that arise out of the provisions of the bill.

1. The additional costs that will be imposed on households do not suffice the insignificant benefit that the US Cap and Trade System will contribute to the overall global warming problem in the whole world. Thus, the effort is futile considering that other countries have not made any substantial intention to complement US lead on the issue. With the 17% reduction of emission, US will only lessen carbon dioxide emission in the atmosphere by 4%.

2. The bill indicates that pollutant credits are to be given away to companies depending on their current usage. However, the Environmental Protection Agency (EPA) has not yet established standardized measures to control and restrict companies in their emissions based on actual product or operation requirements. The basis of the government to give away emission allowances is for companies to gradually reduce their usage. On the negative side, companies might actually increase their present gas emissions in order to increase their eligibility for larger pollutant credits. In effect, the amount of greenhouse gases produced in the environments might become greater than what is actually needed. Thus, the purpose will be defeated.


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