Cap & Trade System Definition
A cap and trade program is a system of pollution "credits." Facilities are allotted credits for the amount of pollution they are permitted to emit. Credits can be bought and sold on the open market. The goal of cap and trade is to improve overall air quality.
Other People Are Reading
-
Definition
-
"Cap and Trade" is a system of implementation of air pollution output standards. Companies are required to stay below the maximum established thresholds. Those companies that have leftover "credits," from exceeding the standards, can sell them to other companies that may not be able to afford modern equipment and are unable to stay below the cap. This is the "trade" portion of the cap and trade program.
Benefits
-
One of the benefits of this program is that companies that operate below the cap can add to their profitability by selling their extra "air pollution capacity." Companies whose emissions exceed the cap are encouraged to save money by reducing their pollution output, so that they will no longer have to buy credits on the open market.
-
Misconception
-
A misconception about a cap and trade program is that it will improve air quality by reducing pollution. The reality is that air pollution will likely continue to reach the total maximum level as long as there are credits to buy. Only when the cap is lowered will overall air quality improve.
Considerations
-
The overall standards are set nationally for cap and trade programs; however, geographic areas with heavy industry can end up being more polluted. Polluting companies can buy credits rather than decrease emissions, which actually reduces air quality in those locales.
Mercury
-
Mercury pollution is a problem in heavily industrialized areas. Other air pollutants have a lower toxicity and tend to disperse. Mercury, on the other hand, tends to accumulate near the pollution source. These areas may now have increased mercury pollution, since polluting companies can buy credits in the cap and trade program rather than reduce mercury pollution.
-
References
- Photo Credit Image by Flickr.com, courtesy of Adam Sofen
