how does cap and trade work
The best climate policy — environmentally and economically — limits emissions and puts a price on them. Cap and trade is one way to do both. The cap on greenhouse gas emissions that drive global warming is a firm limit on pollution. The cap gets stricter over time.
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The trade part is a market for companies to buy and sell allowances that let them emit only a certain amount, as supply and demand set the price. Trading gives companies a strong incentive to save money by cutting emissions in the most cost-effective ways. The government sets the cap across a given industry, or ideally the whole economy. It also decides the penalties for violations. Carbon dioxide and related pollutants that drive global warming are main targets of such caps. Other pollutants that contribute to smog can also be capped.
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In carbon dioxide's case, the heat-trapping greenhouse gas mixes into the upper atmosphere and has a global effect. Reducing emissions locally lowers levels around the world. The total amount of the cap is split into allowances, each permitting a company to emit one ton of emissions. You'd have to drive 2, miles, roughly the distance between New York and Las Vegas, to emit that much carbon dioxide. The government distributes the allowances to the companies, either for free or through an auction. The cap typically declines over time, providing a growing incentive for industry and businesses to reduce their emissions more cwp, while keeping production costs down. Companies that cut their pollution faster can sell allowances trace companies that pollute more, or "bank" them for future use. This market — the "trade" part of cap and trade — gives companies flexibility. It increases the pool of available capital to make reductions, encourages companies to cut pollution faster and rewards innovation.
As companies use established techniques to lower emissions, such as adopting energy-efficient technology, entrepreneurs see opportunity. Ever wonder why you don't hear about acid rain anymore? Thank cap and trade, which slashed levels of sulfur dioxide to solve the problem — at a fraction of the projected cost. A market-based approach like cap and trade allows countries how does cap and trade work make more ambitious climate goals.
Environmental enforcement officials, trained by EDF, conduct an on-site inspection at a factory in China. China, the world's largest greenhouse gas emitter, launched the initial phase of a national carbon market in with help from EDF. The national program builds on pilot emissions trading systems, which have included elements of cap and trade and are already underway in seven cities and provinces in China. The centerpiece is the cap-and-trade programwhich EDF has helped design and implement.
Cap and trade makes even deeper cuts possible when countries cooperate, such as the United States and Canada. California and Quebec connected their systems inbuilding a strong market that shows great potential. Every day more than 60 people sign up for news and alerts, to find out when their support helps most. Will you join them?
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Read our privacy policy. How cap and trade works Cap and trade reduces emissions, such as those from power plants, by setting a limit on pollution and creating a market. Caps limit harmful emissions The government sets the cap across a given industry, or ideally the whole economy. Companies are allowed to emit set amounts The total amount of the cap is split into allowances, each permitting a company to emit one ton of emissions. Trading can lead to cuts in pollution sooner Companies that cut their pollution faster can sell allowances to companies that pollute more, or "bank" them for future use.]
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