ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Understanding the Terms Cap and Trade

Updated on September 25, 2010

The terms cap and trade has been discussed in the political landscape and depending upon who you listen to you may get a different perspective. The terms cap and trade involves the release of emissions from businesses and sometimes individuals into the air. The discussions around this issue require that the terms be understood before a position can be made for us as individuals.

The environment in Congress indicates that this issue will not be resolved before the mid-term elections in November. Current status of legislation involving these terms is not clear other than it appears that not enough support exist in Congress to push legislation forward. The issue involved with the legislation as it is written today is complex to say the least. To discuss the terms cap and trade we must first understand what they mean and what they represent. In researching these terms I found some interesting things about this issue.

First there are several definitions which can be found on the Internet concerning these terms. The most reasonable or easily understood definition is the following: “a flexible environmental regulation mechanism that sets an overall limit on the emission of a certain pollutant, but allows companies that can easily reduce emissions to sell credits to other companies for which such reduction would be difficult”. This definition was taken by searching for a definition of the term cap and trade.

Currently the prospect of a cap and trade system being introduced into legislation is not good but it is something we must understand. Currently there is an alternative energy legislation involving requiring states to establish alternative energy portfolios. This would mean that it would be required that utilities provide a specific percentage of their power from low-pollution sources. The details of this legislation are not clearly defined except for the purpose. The purpose is to require some use of alternative sources of energy such as wind turbines, solar panels and other sources that pollute less than plants fueled with oil, coal and natural gas.

I have no problem with increasing the use of alternative sources of energy as I feel we must do this to survive in the future. The increasing need for energy in the future is undeniable and it is how this need will be satisfied is the question. There is no question we have abundant resources of energy in this country that is underutilized. This must change. In the past we have been comfortable with the resources we used but today they are becoming more expensive. A large percentage of energy sources we use are furnished from outside our country. This dependency must change.

Previously I mentioned the prospect of utilizing energy sources that pollute less is a great objective. While a cap and trade system may achieve the goal of increasing the use of alternative sources of energy the principle would involve reducing the use of energy resources that are vital to some state economies. One example is the coal industry. The use of alternative sources of energy should reduce cost not increase them. Allowing businesses to purchase credits from another increases the cost of doing business and that cost will be seen in the price of the products or services those businesses provide. Energy legislation is needed. The current legislation in the development stage has an objective of establishing a renewable energy standard. Standards are great but they must be carefully created to achieve the desired results. Both the positive and negative impact must be examined to ensure the positive outweighs the negative. The final energy legislation should be one that addresses this aspect if some sort of cap and trade is included.

The EPA is tasked with the responsibility of protecting human health and the natural environment of air, water and land. If energy legislation is not enacted in this legislative session this agency may be limited in what it can do. Actions taken to address reduction of pollutants should be within the current laws on the books and within the authority granted to it by Congress. Energy independence is important and this agency is an important aspect to achieve this objective. Congress needs to complete energy legislation that has a positive impact on business and offers opportunities for job creation in reaching desired objectives.


    0 of 8192 characters used
    Post Comment

    • Au fait profile image

      C E Clark 4 years ago from North Texas

      We not only need to develop new sources of energy that will make us less dependent on other countries, but ideally energy sources that will make us independent energy wise.

      The cap and trade basically means the amount of pollutants a particular factory or business can release into the environment will be capped (limited) to a certain amount.

      If a company is already releasing fewer pollutants into the environment than they are allowed to release, they can sell (trade if you prefer) their right to dump even more pollutants into the environment to a company that is dumping more than they are allowed. That way, the company that is dumping more pollutants than they are authorized to dump into the environment will not have to make changes as soon, or in some cases at all, because they have purchased the rights more environmentally responsible companies have but are not using because those companies do not need them.

      As a result, very little is changed by way of pollutants in our environment. It just becomes another political game that allows the huge companies to take advantage of smaller companies and people generally.

      I do not like the cap and trade plan. Several European countries already have it and no improvements have been noted. Rather than lowering the amount of pollution in our environment it merely redistributes it. Nothing is gained in reducing pollution in our environment locally or world wise because few if any changes ever happen.

      Big greedy companies make more money because they do not have to change their ways and people are worse off because as much or more pollution continues to be dumped into our environment to make us sick and to kill us.

      I say no to cap and trade. Instead develop and adopt a plan that will reduce pollutants, or better yet, get rid of them as much as possible permanently. Give factories and businesses a reasonable deadline for compliance to reducing the junk they pump into our environment and stick with that deadline. If a company goes belly up as a result it's no worse than if they send all of our jobs overseas, which most of the big companies are doing. Either way there are fewer jobs in this country, but if companies go out of business because they refuse to meet necessary requirements regarding pollution, at least it is for a good cause -- a safer healthier environment for everyone.

      I don't really believe any companies will go out of business as a result of meeting pollution requirements because the big companies can afford to make the changes, they just don't want to be bothered, and of course they never want to spend a penny if they can help it, not even if it means saving the health and lives of their customers, where their money comes from in the first place.

      Big companies will whine and cry that it will cause them to go out of business, but they always poor mouth in an effort to put more money into their corporate pockets. Can you even imagine how humiliating it would be for the CEO of some huge company to have to make do with just 6 vacation homes instead of 12? I don't believe they have earned what they have. I believe they have stolen it by paying low standard wages, providing no benefits to their workers, selling sub standard products, and destroying the environment. Yet some people admire them for these practices. Is it simply ignorance on the part of the admirers or plain evil?

      Cap is fine for a starter so long as it continues to cap the amount of pollution dumped into the environment at lower rates every year, but no trade period. No selling the right to companies to continue to pollute at their current levels or worse, to increase the amount of pollution they dump into our environment that we all depend on for our health and our very lives.

      Voted up, interesting, etc. Sharing with followers.

    • profile image

      Howard Schneider 7 years ago from Parsippany, New Jersey

      Thank you for giving us a clearer definition of what Cap and Trade is. It is quite baffling. I agree that it may not be the ideal way to go. We must explore all forms of alternative green energy and invest heavily in them in the forms of both grants and tax credits. This should have been a prime component of the original stimulus bill of 2009. It is amazing how slowly this country has invested in this essential aspect of our future. This has been mostly due to the cheap historical nature of oil and gas. Hopefully our country and the world will wake up to the fact that we are in danger from global warming and reliance on Middle East oil. Besides, the supplies of oil and gas are not infinite and the prices of these will soon increase dramatically due to lower supplies and greater demand from the developing nations.