The Cap acts as a solid backstop behind all other climate policies. Over time, the limits are tighter until we’ve hit our targets and launched a clean-energy economy. Trade allows companies to swap pollution permits using an auction market for pollution “allowances.”
All kinds of legislation can move us toward our climate goals; energy efficiency standards for vehicles and appliances, smart-growth plans, building codes, tax credits for renewable energy, public investment in energy research and development, utility regulatory reforms.
But the cap in Cap and trade is the only guarantee that we get there. There is no substitute for the certainty of an emissions cap.
Trade hitches the flexible power of the marketplace—the mobilized ingenuity of millions of diverse, dispersed, innovative, self interested people—to our climate goals. The point of such a trading system is to put a price on pollution that will travel throughout the economy, motivating businesses and families to find ways to trim greenhouse gases.
By turning the permission to pollute into a commodity that is bought and sold, everyone up and down the economic ladder gets new opportunities to make and save money by switching to a low carbon economy.
So Cap and Trade combines guaranteed results (Cap) with flexible means (Trade).
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