Wednesday, March 4, 2009

Cap and Trade

I could be wrong but I don't think that people in mainstream of America really understand the proposed Cap and Trade program and how it will affect everyone. First, let me just state that I am not an authority on Cap and Trade but I do want to attempt to share some of the basics about the program as I understand them. You can be sure that I am not going to get all mixed up with every little detail – in part because the objective of this article is to keep it as simple as possible – and because I simply don't have the back ground to.


The first part of the program is "Cap" – meaning that the new law would put a cap on the amount of carbon that a producer could emit into the atmosphere. Carbon emission producers are factories, energy plants, paper mills and many others. Many carbon emission producers currently emit more carbon than what the new cap would allow. Which brings us to the second part of the program – "Trade". With the new cap in place those companies who produce above the cap limit would not be allowed to continue to operate unless they either reduced their carbon emissions or found a partner to "trade" cap space with.


Essentially, the trade would involve one company purchasing the ability to produce carbon emission above and beyond their allowable cap for a price. Companies who don't produce as many carbon emissions as others would be in a position to sell their carbon cap space to other companies who are overproducing or above the carbon emissions cap.


Over the long run this would encourage industries to find ways to continue to make their products with less carbon emissions. In fact… The forces of the Cap and Trade system acting on the market would produce a few outcomes. First – carbon emissions would be lowered, which is theoretically a good thing. Second – there would be advances in technology brought about by industries trying to find new ways to make their products without producing as much carbon. And third – the products that these industries and companies produce would be more expensive due to absorbing the operating expenses of the Cap and Trade system.


How much more expensive? I don't know but… I do know that when my wife and I are happy that our electricity bill came back down to $640 this month as compared to $770 last month – we do not want to see anything put in motion right now that would force prices, especially energy prices to go any higher than they already are - period!


Here is an idea Mr. President – how about we get through this economic crisis first – then we can save the world with your cap and trade plan.

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