Carbon Cap And Trade

From: Edison C. Amah

To: Estaban Herrera, Cassidy

Re: Carbon cap-and-trade/ Effects on low-income Americans

As the world nears the age of global warming, or the so-called climate catastrophe era, the need to implement more efficient technology and sustainable ways of energy consumption arises. Greenhouse gas emissions (GHG) are considered one of the leading causes of climate change so the world is trying to find a solution to reduce the rate of GHG emissions. While many countries agree on the importance of sustainability to keep our planet a habitable place in the future, the most effective way of curbing GHGs remains controversial. Within the past decades, there has been much international cooperation like the Kyoto protocol in reducing emissions of GHG like Carbon Dioxide (CO2) into the atmosphere. While many countries see a reason to reduce CO2 emissions by implementing climate legislation like carbon cap-and-trade, there is still reluctance in some countries to reduce their emissions, due to fear that the economy will be affected, or that their CO2 emissions level is negligible compared to high emitters like the rich countries.

Recently, the United States congress introduced a carbon cap-and-trade systems bill as the best way to curb CO2 emission in the United States. While cap-and-trade systems have been praised by some experts as the best measure, the carbon cap-and-trade bill is still a major issue among average Americans. Citizens are forced to choose between their businesses as usual, or abiding to the new environmental legislation, which might lead to them to sacrifice something like changing their way of life, or paying more for energy.

The Science of Carbon Cap-and-Trade

First, carbon cap-and-trade is the process of setting limit on the amount of carbon dioxide emissions that individuals or companies can emit into the atmosphere and then allowing people to trade them. The science behind carbon cap-and-trade is that companies are obligated to have carbon permits from the government before they can emit CO2 into the atmosphere. In this system, companies can trade their permits once they meet their goals, to companies that are struggling to maintain their carbon limits. The revenue generated by the government from selling the permits will be used in solving problem like investing in a cleaner energy technology, and subsidizing energy cost for low-income families.

In the United States, president Obama unveiled a plan that would reduce carbon emissions in his outlined budget for 2010. The plan, which involves a cap-and-trade system, would help to reduce carbon emissions by 14 percent from their 2005 level by 2020, and 85 percent by 2050. The government hopes that setting a price on a carbon permit at $20 per ton of carbon will open up a debate among industries between concurrently buying a government set-price, or choose incurring a onetime expense by investing in cleaner energy technologies that will help them reduce their CO2 emissions.

Social and Ethical Aspects of Cap-and-trade

While the theory of cap-and-trade has been suggested to work better than other CO2 reduction measures like a carbon tax, there are still loopholes circling the effectiveness of the system in a normal American society? The effects of carbon cap-and-trade system can lead to a change in the standard of living for Middle Americans. In addition, government inability in managing and monitoring the issued permits could lead to fraud within the system, and market flaws could hinder the purpose of the cap-and-trade.

In responding to the claim that the proposed cap-and-trade bill would reduce CO2 emissions by 60 percent to 80 percent by 2050, the Heritage Foundation's analysis of the bill discovered the bill would have an extraordinary impact on the economy. The estimated aggregate losses to Gross Domestic Product (GDP) in the analysis, adjusted for inflation, are $4.8 trillion for the first two decades. Over the next 20 years, they estimated that there would be nearly 3 million job losses in the manufacturing sector, which is three times greater in the absence of cap-and-trade legislation.

Moreover, the consumers and low-income Americans are not spare from this potential economic downturn due to carbon cap-and-trade. Consumers are likely to suffer the most because 85 percent of the United States energy is based on fossil fuel. So for there to be a significant reduction in CO2 emissions mean significant cuts in energy usage. If companies, especially energy industries, decide to keep buying government permits, rather than investing in cleaner energy technologies to reduce their emissions they will pass the cost on to consumers. According to David Kreutzer of the Heritage Foundation,