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Emissions cap and trade is a system for managing the output of greenhouse gas emissions into the environment. The system works by rewarding emissions reductions and places penalties on emissions that exceed predetermined allowances. Types of emissions to be controlled include:
- Carbon Monoxide (CO)
- Lead (Pb)
- Ground-level Ozone Precursor: Nitrogen Oxides (NOx)
- Ground-level Ozone Precursor: Volatile Organic Compounds (VOCs)
- Particulate Matter (PM)
- Sulfur Dioxide (SO2)
One of the most well-known emissions cap and trade efforts is the Kyoto Protocol, an international treaty which attempts to control the emissions of six major greenhouse gases with the goal of reducing output by 5.2% by 2012.
While the US does not have a mandatory, nationwide emissions cap and trade initiative, there are control systems in place to reduce domestic greenhouse gas output. The Clean Air act of 1990 was implemented in an attempt to reduce SO2 emissions by 50% by 2010. The 2007 California Global Warming Solutions Act was enacted to reduce carbon dioxide through manure management, forestry, building energy, SF6 and landfill gas capture.
The largest US-based cap and trade emissions effort comes with the launch of the Regional Greenhouse Gas Initiative (RGGI), in which ten Eastern and Mid-Atlantic States will work toward reducing the greenhouse gases associated with CO2 output from power plants. World Energy has been selected by RGGI to administer quarterly CO2 emissions allowance auctions. The first auction took place on September 25, 2008. In that auction, over 12 million carbon emissions allowances were sold, netting participating states $38,575,000 for clean energy and energy efficiency initiatives.
According to the US Environmental Protection Agency (EPA), a well-designed emissions cap and trade program should provide:
- Strict limits on emissions yielding dramatic pollution reductions
- High levels of compliance, transparency, and complete accountability
- Regulatory certainty and flexibility for sources
- Incentives for early pollution reduction and innovations in control technologies
- Compatibility with state and local programs
- Significant, widespread, and guaranteed human health and environmental benefits
- Efficient use of government resources
- More benefits at less cost
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