Cap and Trade: Getting the Carbon Pollution Cuts We Need Starting Now

As we draw closer to passing a clean energy and climate law that will create millions of jobs and curb global warming, people are debating how to achieve those goals most effectively. NRDC believes the cap and trade approach is the best way to get the job done, and here is why.

Cap and trade isn’t a new idea. We’ve used it before and we know it works.  We’ve used it to get lead out of gasoline, to curb pollution that causes acid rain, and to get rid of chemicals that deplete the ozone layer.

We can do the same with carbon. In fact, we already are. Today, 10 Northeastern states, California, and several other states are operating or setting up similar programs. The House of Representatives passed a cap and trade bill last June. And while progress is slower in the Senate, the bill is moving forward. 

Here is what the Senate bill will accomplish. It sets real limits on carbon emissions. It lets companies find the best way to stay within those limits. It creates financial incentives to help them do that and establishes a market where those incentives can be freely traded.

That puts market forces to work at the job of curbing climate change. It’s a powerful tool. And it makes good sense.

The bill does something else essential. It uses the vast majority of the money from the carbon market for public good, not private windfall--80 percent over the life of the bill.

It uses some of the money to help promote the use of wind, solar and other energy sources that will never run out. It uses some of the money to help develop energy-efficient cars, homes and workplaces. And it uses some of the money to help low-income people adjust to the clean and sustainable energy future we all seek.

Indeed, the bill is carefully structured to make sure that we, the energy consumers, receive the financial value of pollution permits through energy efficiency programs and lower bills.

Some people worry that pollution trading could be manipulated on Wall Street. The answer, though, isn’t to abandon markets, but to strengthen them with the safeguards and oversight the Senate bill provides. That's how we can harness market forces to reward companies that generate clean energy, create green jobs, and curb emissions at the lowest cost.

Still, we understand there are some who prefer a different approach. Some think we should just put a tax on carbon and leave it at that. We respect that position. We just don’t think it will work as well as cap and trade.

You see, a tax may limit people’s release of carbon, but it may not do it enough to change the course of global warming. A cap--especially a declining cap--gives you firm targets and a system for measuring when you hit them.

Some say a carbon tax would be simpler or purer than cap and trade.  The tax idea may be simple in concept, but so is cap and trade.  Things get complicated when you try to pass real legislation. 

That is what happened in 1993, when President Clinton proposed the BTU tax on fossil fuels, including coal, oil and natural gas.  First, industries lobbied successfully for exemptions and special-interest provisions. Then they derided the bill as full of loopholes.  (One clever lobby firm sent Congressmen blocks of Swiss cheese.)  The proposed tax got smaller and smaller, and less and less effective.  Ultimately, the BTU tax failed to pass at all. 

Climate change is the single greatest environmental challenge of our time. It threatens us all. So no one should be surprised to hear varied and sometimes competing voices weighing in on how best to confront it. That’s how American democracy works.

What’s important is that our discussions ultimately lead to solutions. We have one before us. The clean energy and climate legislation now before the Senate will put Americans back to work, reduce our reliance on foreign oil and create a healthier future for ourselves and our children.

That’s why we support it. That’s why we are working to get it passed. And we hope others will do the same.