Kari Manlove on Cap and Trade

What is cap and trade?

The cap and trade program is a policy thatÕs meant to reduce the green house gas emissions from the United StatesÑgreenhouse gas emissions that are contributing to global warming. What the program does is set a ceiling or cap on the amount of emissions that the United States are allowed to emit from its industries, building and transportation sectors. The federal government sets the cap and distributes emissions allowances based on that cap to individual companies. Some companies then will be able to keep their emissions below what is designated as their cap, and other companies will go over. This where the trade part comes in because companies that go over can then buy permits from companies that kept under the cap. What this also does is incentivize companies to invest in clean energy technologies and energy efficiencies so they donÕt have to buy permits from other companies.

Now the government can allocate capsÑcan allocate allowances in two different ways: It can either give them away or it can auction them off. The Center for American Progress and many others nationally and globally advocate a full auction of emissions allowances. This insures that: a) polluters pay; and b) the federal government generates new revenue that it can then use to alleviate rising energy prices for low- and middle-income Americans and invest in the infrastructure and low-carbon technologies that are needed to transition our economy to one thatÕs low carbon.

How does cap and trade figure into President ObamaÕs budget?

President Obama has presented a bold budget for fiscal year 2010. We know that heÕs serious about climate change because he accounts for the revenue thatÕs going to be generated by a cap and trade auction. This begins in 2012 and between 2012 and 2019 a cap and trade program is going to generate 650 billion dollars in additional revenue for the government to use.

What effect will a successful cap and trade program have on the economy?

Today our economy is dependent on energy sources that are dirty and volatile in price. The cap and trade program is going to help fundamentally the way that we produce and generate energy in our country. Energy policy is economic policy and so itÕs essential to insure that both are sustainable and fit for the 21st century. One of the things that a cap and trade program is going to do is itÕs going to drive innovation in the clean technology and energy sectors. ItÕs going to create business opportunities and weÕre going to see competition thrive.

What weÕre also going to see is green job creation. Green jobs means making energy efficiency retrofits, installing pv panels on rooftops and weatherizing low-income homes. A lot of these investments are the types of things that we saw in ObamaÕs stimulus package. This is because one of the purposes of the package is to put our economy en route to a green recovery. Over the long term this is going to make our economy less dependent on fossil fuels and fickle energy prices. ItÕs also going to insure that we maintain economic and environmental security.