Cap and Trade 101: How a “Cap” Ensures Carbon Reductions
Now that Cap and Trade is a possibility, there is a rising clamor for a carbon tax instead, from conservative thinktanks like the American Enterprise Institute, outlets like The Washington Times and even directly from Exxon itself. Yet when first introduced by Al Gore, in 1993, the carbon tax was anathema to the fossil industry. What makes a carbon tax now less of a threat than Cap and Trade? It’s the Cap.
The key difference between Cap and Trade and a carbon tax is that a carbon tax controls just the cost of pollution - only a cap limits the quantity.
The “Cap” limits emissions by fossil companies
The Cap in Cap and Trade is the only mechanism for ensuring a total limit to carbon emissions. A Cap is set for the fossil industries as a whole. The Cap on emissions at point-of-entry sources (oil pipelines, coal fields and coal-fired power stations) in the current Cap and Trade bill limits total carbon.
