Do Now #53: Cap-and-Trade for Carbon?
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California recently implemented a cap-and-trade program in order to cut carbon emissions. Would a carbon tax be better or worse? What do you think about cap-and-trade? How can companies be best regulated to reduce greenhouse gas pollution?
Since the Industrial Revolution, there has been a substantial increase in carbon dioxide emissions in the U.S. and countries around the world. The increase is due to human activities, namely the burning of fossil fuels for energy and transportation, industry processes and land-use changes. The additional carbon dioxide (and other greenhouse gases) in the atmosphere trap heat and cause the Earth’s surface temperatures to rise, also known as the greenhouse effect. To combat climate change, scientists have said that we need to cut our greenhouse gas emissions.
Last month, California launched its cap-and-trade program. In this program, the government sets a limit on the total amount of allowable carbon emissions from businesses, refineries, manufacturers and power plants. This limit will decline 2-3% each year. Major emitters of greenhouse gases must get permits, known as allowances, for each ton of carbon they emit. Initially, businesses receive most of the allowances from the state for free. Over time, the state also auctions allowances to the highest bidders. As the overall cap on emissions is lowered each year, businesses must continue to obtain allowances equal to their emissions. They can buy unused emission allowances from other companies, or they can sell emission allowances that they may have leftover. So, a company that isn’t ready to cut its carbon emissions enough to meet its allowance can buy emissions from other companies that can reduce their emissions.
The idea is that by putting a cap on total emissions and requiring businesses to purchase extra allowances, or sell what is “unused,” there is financial incentive for businesses to lower emissions. Environmentalists like the cap-and-trade program because there is a cap–a specific limit on all carbon dioxide emissions. Some companies like that the program is flexible; they can purchase allowances if needed. Others don’t think the state has a right to sell allowances. Critics don’t favor the program, believing that companies will pass the cost of having to buy additional allowances on to consumers.
Some people think that a tax on carbon emissions would be better. Instead of buying, selling and trading allowances, businesses would simply be taxed on the amount of carbon they emit, removing need for this new carbon market. Even though there is not a limit put on emissions, the idea here is that if the tax is big enough, companies will cut their emissions to allay the cost. Critics, however, say that a carbon tax doesn’t guarantee that emissions will fall because there is no cap.
So, what do you think about cap-and-trade? Would a carbon tax be better or worse? How can companies be best regulated to reduce greenhouse gas pollution?
KQED QUEST Cap-and-Trade 101: How California’s Carbon Market Works – Nov. 9, 2012
This week, California rolls out the heavy artillery in its attack on climate change with a program called “cap-and-trade.” It’s like a stock exchange for carbon emissions, where the state’s biggest polluters have to buy the right to emit greenhouse gases. It’s the most ambitious climate change policy in the country, but not everyone is happy with it.
To respond to the Do Now, you can comment below or tweet your response. Be sure to begin your tweet with@KQEDedspace and end it with #DoNow53
For more info on how to use Twitter, click here.
We encourage students to tweet their personal opinions as well as support their ideas with links to interesting/credible articles online (adding a nice research component) or retweet other people’s ideas that they agree/disagree/find amusing. We also value student-produced media linked to their tweets like memes or more extensive blog posts to represent their ideas. Of course, do as you can…and any contribution is most welcomed.
NPR Planet Money – Dude, Where’s My Cap-And-Trade Primer? – June 12, 2009
Congress is about to take up legislation to curb carbon emissions with a cap-and-trade program. To understand how the cap-and-trade system works, no textbook is required. You just have to be familiar with the word dude — like surfer dude.
Mercury News – 13 things to know about California’s cap-and-trade program – Dec. 2, 2012
State regulators are celebrating California’s first-ever auction of greenhouse gas emissions allowances held Nov. 14. So what exactly happened? Why does it matter? And what happens next? The San Jose Mercury News has received many questions from readers about the cap-and-trade program; this article answers several of them.