Cap & Trade - Marketable Sustainability |1

Welsford Bishopric

GST 110

Dr. Burbridge

Cap & Trade

Marketable Sustainability

Emissions trading is an innovative method of financially rewarding firms and countries

which maximize efficiency and environmental accountability. This is done through the creation

of a virtual market for the buying and selling of firms’ excess emissions. In this way, ‘Cap and

Trade’ is one of very few practices aimed at aiding the environment which also appeals to the

capitalistic spirit.

According the EPA, Emissions trading, or ‘Cap and Trade’ is “an environmental policy

tool that delivers results with a mandatory cap on emissions while providing sources flexibility

in how they comply.”1 Most Cap and Trade programs work by issuing a set number of

emissions credits, in the form of waivers, to an industry or country. As these waivers represent

a given amount of emissions, this method allows a governing body to specifically mandate the

amount of pollution produced by an entire industry, rather than micromanage individual firms

through traditional regulation.2 The concept of emissions trading is based on the freedom

which all participants in free-market capitalistic economy are accustomed to: the freedom to
1
Cap and Trade | US EPA. (n.d.). US Environmental Protection Agency. Retrieved December 2, 2010, from
http://www.epa.gov/capandtrade/
2
Streeter, S., & Ramseur, J. (2010). Cap and Trade: The Kyoto Protocol, Greenhouse Gas (GHG) Emissions,
Carbon Tax, Emission Allowances, Acid Rain SO2 Program, Ozone Transport Commission, NOX, Carbon
Markets, and Climate Change. Alexandria, VA: Thecapitol.Net, Inc..
 Cap & Trade - Marketable Sustainability |2

make decisions about how to overcome obstacles. This is made possible by the availability of

the dual solutions that firms can use to address accountability issues; first, a company may

simply modernize their methods of production to reduce pollution and, in doing so, have an

excess of emissions waivers. Secondly, a firm which is either unable or unwilling to lower

pollution levels may simply buy these extra waivers, allowing them to continue to produce at

the same rate using the same means of production.3 In this way, Cap and Trade limits the total

amount of emissions at the number of waivers issued and encourages long-run modernization

in industry per the profit motive.

Emissions trading has met much controversy since its first proposal, especially in the

United States. During the Bush administration, Democrats fought the policy, arguing that it did

not sufficiently address pollution problems and that, in some cases, it actually allowed firms to

legally pollute more.4 This argument fails to address the fact that net pollution levels are

regulated at precise levels for the entire industry. This allows broader controls and also more

flexibility for individual firms, while maintaining designated levels of pollution throughout an

industry. Some, including most Democrats, argued that increased regulation is the key to

environmental accountability. This argument is flawed in that such policies would lead to

applying blanket policies onto each individual firm, something that emissions trading avoids by

allowing firms to design their own, individually optimized, solutions while still abiding by the

pollution limits set by the government.5 Since Obama began to support Cap and Trade,

3
Streeter, S., & Ramseur, J. (2010). Cap and Trade: The Kyoto Protocol, Greenhouse Gas (GHG) Emissions,
Carbon Tax, Emission Allowances, Acid Rain SO2 Program, Ozone Transport Commission, NOX, Carbon
Markets, and Climate Change. Alexandria, VA: Thecapitol.Net, Inc.
4
Riley, M. (n.d.). Big stakes, big challenge in Democrats' cap-and-trade bill - The Denver Post. Home - The
Denver Post. Retrieved December 2, 2010, from http://www.denverpost.com/news/ci_1
5
Singer, P. (2002). One Atmosphere. One World (2nd Edition ed., pp. 14-50). New Haven: Yale University
Press.
 Cap & Trade - Marketable Sustainability |3

Republicans have become increasingly, and vocally, dissident toward such policies. 6 They base

their attacks on the belief that such a program would increase overall cost of goods and

represent the equivalent of a suppressive tax on industry. The former argument can be

dismissed fairly easily using the economic concept of Social Welfare. Even if a good is more

expensive to produce and purchase, the extra cost stems from the expenses a firm incurs while

implementing more environmentally-friendly practices, which benefits the consumer in the

long-run by protecting their environment and health. Especially in light of these arguments,

which wholly dismiss both parties’ arguments, the sudden shifting of party positions suggests

that these anti-emissions trading arguments are little but political posturing. 7

Cap and Trade programs have had significant success, especially in the EPA’s drives to

lower emissions of Sulfur Dioxide and Nitrous Oxide.8 One such program, called the ‘Acid-Rain

Program’ mostly targeted coal-burning power plants. This initiative, which practiced the Cap

and Trade concepts of emissions waivers has, over its fifteen year lifespan, decreased Sulfur

Dioxide levels more than 40 percent. 9 The resounding success of this and other similar

programs both internationally and on a regional or industry-wide scale in the United States

shows the effectiveness of Cap and Trade Programs.

6
Boston. (n.d.). Republicans to shut down House select committee on climate and energy - Political
Intelligence - A national political and campaign blog from The Boston Globe - Boston.com.Boston.com.
Retrieved December 2, 2010, from http://www.boston.com/news/politics/
7
Rieland, R. (n.d.). Remember when Republicans liked cap-and-trade? | Grist. Grist | Environmental News,
Commentary, Advice . Retrieved December 2, 2010, from http://www.grist.org/article/2010-06-29-
remember-when-republicans-liked-cap-and-trade
8
Cap and Trade | US EPA. (n.d.). US Environmental Protection Agency. Retrieved December 2, 2010, from
http://www.epa.gov/capandtrade/programs
9
Acid Rain Program | Programs and Regulations | Business | Clean Air Markets | Air & Radiation Home | US
EPA. (n.d.). US Environmental Protection Agency. Retrieved December 2, 2010, from
http://www.epa.gov/airmarkets/pro
 Cap & Trade - Marketable Sustainability |4

Internationally, emissions trading has gained much more support and is incorporated

into the Kyoto protocol. Most Annex One European countries have long practiced Cap and

Trade, most recently through the European Union Emissions Trading System, the largest Cap

and Trade system in history.10 This international scale of emissions trading can easily improve

global rates of efficiency and conservation, just as was seen on an industrial level in the Acid-

Rain Program in the United States.

Global Cap and Trade has the potential to simplify global pollution concerns by creating

an even, fair system which will allow countries to respond to restrictions in whichever way they

prefer, offering a more flexible and capitalistic method of protection the world’s environment,

from acid rain to the ozone.

References
Acid Rain Program | Programs and Regulations | Business | Clean Air Markets | Air & Radiation

10
Emissions Trading System (EU ETS) - Policies - Climate Action - European Commission. (n.d.). EUROPA -
European Commission - Homepage. Retrieved December 2, 2010, from
http://ec.europa.eu/clima/policies/ets/
 Cap & Trade - Marketable Sustainability |5

Home | US EPA. (n.d.). US Environmental Protection Agency. Retrieved December 2,

2010, from http://www.epa.gov/airmarkets/progsregs/arp/index.html

Boston. (n.d.). Republicans to shut down House select committee on climate and energy -

Political Intelligence - A national political and campaign blog from The Boston Globe -

Boston.com. Boston.com. Retrieved December 2, 2010, from

http://www.boston.com/news/politics/politicalintelligence/2010/12/republicans_to.ht

ml

Cap and Trade Programs | Cap and Trade | US EPA. (n.d.). US Environmental Protection Agency.

Retrieved December 2, 2010, from http://www.epa.gov/capandtrade/programs.html

Cap and Trade | US EPA. (n.d.). US Environmental Protection Agency. Retrieved December 2,

2010, from http://www.epa.gov/capandtrade/

Emissions Trading System (EU ETS) - Policies - Climate Action - European Commission. (n.d.).

EUROPA - European Commission - Homepage. Retrieved December 2, 2010, from

http://ec.europa.eu/clima/policies/ets/index_en.htm

Rieland, R. (n.d.). Remember when Republicans liked cap-and-trade? | Grist. Grist |

Environmental News, Commentary, Advice . Retrieved December 2, 2010, from

http://www.grist.org/article/2010-06-29-remember-when-republicans-liked-cap-and-

trade

Riley, M. (n.d.). Big stakes, big challenge in Democrats' cap-and-trade bill - The Denver Post.

Home - The Denver Post. Retrieved December 2, 2010, from

http://www.denverpost.com/news/ci_12322198

Singer, P. (2002). One Atmosphere. One World (2nd Edition ed., pp. 14-50). New Haven: Yale

University Press.
 Cap & Trade - Marketable Sustainability |6

Streeter, S., & Ramseur, J. (2010). Cap and Trade: The Kyoto Protocol, Greenhouse Gas (GHG)

Emissions, Carbon Tax, Emission Allowances, Acid Rain SO2 Program, Ozone Transport

Commission, NOX, Carbon Markets, and Climate Change. Alexandria, VA:

Thecapitol.Net, Inc..