6 Vital Pros and Cons of Cap and Trade

6 Vital Pros and Cons of Cap and Trade

by / Comments Off / 5407 View / Apr 11, 2015

Whether you believe choose to accept that Global Warming is happening or not, pollution is something that everyone can agree is generally bad. Whether it be the pollution caused when power plants send carcinogens into the air or water pollution caused by trash and other hazards, limiting pollution means guaranteeing a world for our children that we can be proud of.

This mentality has generally guided the United States to instill a number of regulations regarding pollution. The Clean Air and Water Act is a common example used to illustrate how the health of average citizens can be put before corporate profit as well as protected. While not perfect, it at least tries to ensure some measure of control over pollution.

Another frequently contested market related pollution reduction strategy is Cap And Trade. A hot button issue during every election, Cap And Trade has a number of pros and cons associated with its use. Lets take a moment to review what these are in more detail.

The Pros of Cap and Trade

As Global Warming continues to effect life all over the world, limiting pollution is one of the greatest ways to slow down this process. Cap And Trade, through its regulation of pollution and carbon emissions, can help the United States meet its obligations at home and abroad while also better tracking the amount of pollution we release into the atmosphere every year. Below are the most common pros associated with having a Cap And Trade system in place.

1. Limits Carbon Release
The best part of Cap And Trade is that it limits and controls the amount of pollution released into the atmosphere by American companies. By creating this system, companies will have to pay for the amount that they pollute, providing a source of revenue as well as limiting pollution when at all possible. This in turn leads to a better environment for everyone both in the United States and abroad to enjoy. In addition, the United States comes out as an example to lowering pollution amounts, giving support to our continued goals to limit pollution worldwide. Finally, having a Cap And Trade system put in place shows future generations that we are responsible.

2. Source of Government Revenue
Cap And Trade is sometimes called ‘taxed pollution.’ This is because pollution credits are given out to companies. The more credits you have, the more pollution you can release into the atmosphere. Each credit has a cost that is owed to the government. Through regulating emissions, the government generates a profit. Given the current deficits being faced by local and state governments, having any additional source of income is a positive.

In addition, these resources can go towards the research and advancement of future green technologies. Helping to cover the expense associated with research and development, safer and cleaner sources of power, like wind turbines and solar panels, can be better researched and more effectively commercialized.

3. Promotes Efficiency
One of the best parts about applying a tax through Cap And Trade is that it incentivizes creativity. Now companies can save money and also go green by investing in cleaner sources of power. By reducing their carbon foot print, these companies can help the environment while saving themselves a lot of money down the road. In addition, it raises the potential that these companies will invest in their own research and development in order to find cleaner and safer ways to dispose of harmful chemicals.

The Cons to Cap And Trade

While we can all agree that reducing pollution is the way to go, problems will emerge with whatever system we develop and put in place. Cap And Trade is no different. Though it represents the possibility of having pollution well regulated, opponents to Cap And Trade ague that it will push companies away from green technology, that it will create an industry of deception, and that the final cost may be passed on to the consumer.

1. Pushes Companies In The Wrong Direction
Several leaders in the energy industry have come out against Cap And Trade because they believe it will harm green tech advancement. With a Cap And Trade system, it is argued that companies will begin using oil, gas, and coal because it has a cheaper offset. This will in turn raise the demand for these resources while limiting interest in renewable energy sources. Ultimately, Cap And Trade could just push the entire problem of pollution down the line for future generations to struggle with.

2. Risks Creating An Industry Of Deception
Cap And Trade is based on companies accurately reporting the amount of pollution they cause. If Cap And Trade comes into effect, then there is a popular argument that this will cause the energy industry to become deceptive in their reporting. Now, the primary way to stop this would be through inspection of the various industrial sites by government regulators. The challenge is that there are never enough regulators to get the job done. Whether through a limitation of time or manpower, regulating Cap And Trade may prove to be more challenging then first thought.

3. Possible Cost Passed On To The Consumer
Another frequent argument against Cap And Trade is that any cost added to the industry will be passed along to the consumer. For companies producing pollution while creating durable goods, it is safe to assume that every company will be effected equally and increase their prices as a result. The same is true for energy companies. As the majority of energy produced in the United States still comes from these major pollution sources, the cost of energy may rise when a new cost is added because of pollution.

A Brief Summary

Cap And Trade continues to be a hot topic for debate in both the government and among citizens. On the one hand, there are the benefits of limiting pollution, spurring on green technology development, and setting a good example for the rest of the world. On the other hand, there is the risk of passing costs to the consumer, making industry more deceptive, and pushing companies towards the wrong kind of future development.